Confessions of a Mortgage Industry Insider

You think of mortgage brokers as the people who are supposed to find you the best loan, the best rate and the best overall deal on your new home. Think again.

Jeff Corbett, a mortgage industry insider during the heyday of the housing market, joined Carmen on Wednesday’s show to reveal the most egregious tricks of this now beleaguered industry.

Many of the big mortgage players played a “misdirected shell game” with consumers before the market imploded, Corbett said. One common trick was the “bait and switch,” a ploy Corbett himself admits he took part in. Brokers would quote customers the lowest rate available as the “bait,” then collect information and draw them into the process only to disclose later the exact rate they qualify for, "the switch," which was often hugely disparate.

Corbett advised anyone shopping for a mortgage to beware of the points scheme. Brokers are apt to talk in “points” instead of dollars, simply because it sounds less expensive. They’ll say the interest rate is one point higher – but that point is really a percentage point, so on a $100,000 loan that’s $1,000. Make sure your broker expresses fees strictly in dollar amounts, Corbett said.

One trick of the trade that has been largely expunged is the act of forging documents, also known as the “cut and paste.” This is where brokers will superimpose higher numbers onto a customer’s W-2 form to inflate their income and approve a mortgage they wouldn’t normally qualify for. An illegal practice but one that is thankfully over with for the most part, according to Corbett.

Finally, steer clear of the “bank special.” Brokers are often given special kickbacks for selling certain mortgages a bank is pushing that month, which they will in turn try to sell to their customers, even if the rate is higher than what they originally qualified for.

Read more of Corbett’s views and musings on his former industry by checking out his blog at TheXBroker.com