Protection Against Lock Scams

Borrowers are vulnerable to three lock-related scams that occur at different stages of the lending process. Borrowers using this site are protected against all three.

The borrower shopping for a mortgage may encounter the “low-balling scam”. Low-balling lenders quote a price to a borrower below the lender’s posted price, which is the price the lender is actually willing to accept. The purpose is to be selected by the borrower who is shopping prices.

Low-ballers are not deterred by the price disclosures mandated by the Good Faith Estimate. They merely date the disclosure so that the price has expired before the borrower receives it.

Borrowers on this site are not vulnerable to low-balling because they have access to the posted prices of the lenders on the network. There is no opportunity for lenders to low-ball.

The borrower who has selected a lender but has not yet been locked may encounter the "market-volatility scam". The lender takes advantage of changes in the market between the date the lender quoted a price to the borrower and the lock date.

If the market price goes down, the borrower is charged the price quoted earlier, and is probably content, since he received what he was quoted. If the price on the lock date is higher, on the other hand, the borrower will be charged the market price or higher, because "the market went against you".

Borrowers on this site who have selected their lender but have not yet been locked can’t be victimized by the market volatility scam. The certified network lenders on the site are required to observe the “twin sibling rule”: they must lock at the exact same price they would quote to the borrower’s twin on the identical transaction at the same time. Further, a borrower can access the lender’s posted price on his transaction on the lock day by checking his price that day.

The borrower whose loan has been locked may encounter the “property valuation scam.” Locks are always contingent on a specified credit score and loan-to-value ratio. A material change in one of these can invalidate the lock. While lenders will always verify the credit score before locking because that only takes minutes, in most cases they will lock based on a property valuation that has been checked only against an automated valuation program. An appraisal, which is the final word on valuation, takes days and often weeks.

Nonetheless, the appraisal when it becomes available can invalidate the lock. If the appraisal comes in lower by enough to raise the loan-to-value ratio past a notch point where the price increases, the lender increases the price accordingly. But if the appraisal comes in higher by enough to reduce the loan-to-value past a notch point where the price should decrease, the original lock price is retained.

Certified network lenders are required to treat price changes based on valuation adjustments symmetrically, lowering prices when that is called for, as well as raising them. Borrowers can check compliance by revising Your Inputs and rechecking the price.

Want to shop for a mortgage on a level playing field?

Why Shop for a Mortgage with the Professor?

  1. Receive His Help in Finding the Type of Mortgage That Best Meets Your Needs
  2. Shop Prices Posted Directly by His Certified Lenders
  3. Shop Prices Fully Adjusted to Your Deal
  4. Shop Prices That Are Always Current
  5. Get Him as Your Ombudsman Just in Case

Read More About the Support and Protections Listed Above

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