I have long discouraged my customers and clients from using online lenders. As far as I’m concerned, if they don’t have bricks and mortar in the state in which you are residing, who knows what laws govern their operation? What real estate laws and customs are they familiar with? And when mortgage brokers — who DO have bricks and mortar in the neighborhood — can be such problem sources that the State of Maryland has finally begun to regulate and license all mortgage officers, who is looking over the shoulder of the online lenders?
I’ve heard of many situations where out of state, online based lenders balk at the settlement table because they are unfamiliar with Maryland idiosyncracies, such as ground rent, and where buyers find their loan paperwork looks nothing like what they were promised, as far as interest rate, penalties, payments, etc. But a recent article in the New York Times (11/12/2006) brings the ethics of two such online lenders into question.
Bankrate.com and LendingTree.com seem to have been caught with their hands in the cookie jar. A class action suit was filed against Lending Tree last October, claiming that despite their advertising claims that mortgage lenders compete for the buyers who come there, Lending Tree in fact diverts all buyers to their own in-house lender, Home Loan Center, Inc. Home Loan Center then functions like a regular mortgage broker, a reseller of loans from other companies. But no rate comparisons are made, so its unclear whether those companies are actually ‘competing’ for Lending Tree customers, or whether Home Loan Center just makes a scad of money from their own fees.
So all those bankers in the commercial actually work for one company. Lending Tree. Hmmmm.
Bankrate.com settled a class action lawsuit last October in which customers claimed that the lenders advertising on that site promised rates they did not deliver. Bankrate paid $3 million to the plaintiffs, without admitting guilt. That’s a lot of money for an innocent company to pay out, just to keep the trial from going forward. Makes ya wonder, doesn’t it?
So, who IS watching these companies? Seems like just the trial lawyers. I’d keep that in mind the next time you’re looking for a home loan.
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