By Jesse Herman, contributing editor
Mortgage brokers come in all sizes, shapes and colors. It can be difficult to determine who is candid and who is not. After all, most sales tactics are similar in content and delivery.
Scams, strong-arming, bait and switch and up sell; these are all terms for methods used by disingenuous mortgage brokers and loan officers for various home loans. This also applies to many services whether buying a car, a pair of shoes and almost any product that involves a salesman. Many people walk into these situations claiming, "I'm not going to fall for any of these scams." The problem is the scams of today do not reflect those of yesterday. As consumer awareness grows, so too does the methods of the person who is trying to earn easy money.
Here are some surefire ways to know you are being duped by old, time proven ways of 
duping.
- You discover that an agreed home mortgage loan type was abruptly changed
- Loan fees suddenly rise to unexpected levels
- Cash returned is much less than anticipated
- All of a sudden there are prepayment penalties
- The great, low mortgage rate agreed upon unexpectedly is much higher
The above mentioned ways have been figured out for the most part. Modern day "bait and switch" involves more subtle, legal approaches. That's right, legal. Here is how it works in four easy steps:
1. Through the course of an interview a loan officer (Bob) will ask what your home is worth. Based on the information given the loan officer will compare it to other houses in your neighborhood and a number will be agreed upon.
2. Bob suggests that for a home with an estimated value of $180,000, you take a loan to value (LTV) of 90%. Well, a new loan officer (Fred) sweeps in and says your home is actually worth $192,000. Thus, instead of taking a 90% LTV you now take a 80% LTV—a significant savings.
3. Suddenly you get a call from Fred stating that your home is actually worth $180,000—or the original amount estimated by Bob.
4. This results in an LTV of 90%. As a borrower, you can't even remember what LTV rates were offered originally by Bob. Plus, you've already paid Fred the $350 to move your loan forward. The motivation to explore other options has been minimized over time and you are most likely stuck with Fred's plan, whose rates are higher than Bob's.
The catch is that the overestimated value of the home is nobodies fault. The appraiser, an independent 3rd party, is the one who believes the value of your home is $180,000 and not the $192,000 that Fred estimated. Therefore, technically speaking it is not Fred's fault.
What can be done?
It helps to know the value of your home by requesting comparable sales reports from your loan officer. Another way is to average the estimates from several loan officers. Do not accept estimates that seem high until thorough research has been conducted.
Knowing the value of your home may seem basic, but it is the best way to avoid future problems. Insurance agents or any salesman can often appeal to your ego- or your excitement over the increased value of a home- keeping tabs of your real numbers can expose this new "bait and switch" ploy.
