In the spring of 2006, I met with a young couple who were in the market to buy their first house. After searching for a few weeks we found a house that was under construction and in their price range. After writing up the offer to purchase the house, I gave them the names and contact information for a couple of lenders. They told me about a man who went to their church who was a mortage lender. I had never heard of him or his company so I encouraged them to speak with all three lenders to compare the closing costs and terms.
During the next few weeks, I tried to contact their lender but he never responded. I spoke with the buyers and learned that they had not spoken to the other lenders and had not received a good faith estimate from their lender. When the buyer told me what their payments were going to be, I knew that something was wrong.
It took a lot of digging on my part, but eventually I learned that the loan this lender had structured was an options arm. The payments he had promised them were based on negative amortorization.
After they realized that this man was a "predatory lender", they decided to use one of the lenders I had suggested. They were able to get a VA loan with no down payment and are reducing the principle with each payment they make.
After the closing, the husband told me that I had saved them from possible financial disaster.
I loved this transaction because the buyers might have lost their house if they had moved forward with the predatory lender.
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