CFPB Warns Consumers of Predatory Lending Practice That Can Cost Them Thousands of Dollars

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It’s a trap you don’t want to fall victim to. 

Most people who want to buy a home can’t swing that sort of purchase outright. That’s what mortgages are for.

But choosing the right mortgage lender is crucial. This especially holds true today given that mortgage rates and home values are both up across the board. As such, you may be inclined to turn to an online platform for help in finding the right lender to work with on your home loan.

But the Consumer Financial Protection Bureau (CFPB) just issued a warning that some of the companies operating these online mortgage lender platforms may not be as objective as consumers might expect. And if you’re not careful, you could be led astray.

When money pulls the strings

The companies that operate digital mortgage comparison platforms are supposed to match consumers up with lenders based on different criteria, including cost-savings for borrowers. Instead, the CFPB cautions that some of these platforms may be rigged to point borrowers toward lenders that pay them the largest kickbacks. So while you might think you’re getting a non-biased recommendation when you search for a mortgage lender, the reality is that you may be getting paired up with a lender based on how much there is to be made at your expense.

Of course, being led astray on a digital mortgage platform could have huge consequences. For one thing, it could lead to higher costs associated with taking out a mortgage, like getting stuck with a higher interest rate on your loan or paying more in closing costs. So it’s a good thing that the CFPB is raising alarms about this issue.

In fact, in a recent press release, CFPB Director Rohit Chopra said, “Given the rise in mortgage interest rates, it is even more important for homebuyers to shop and compare loan offers. We are working to ensure that online platforms are not manipulating their search results in order to coerce kickbacks from lenders.”

Other good ways to find a mortgage lender

Clearly, online platforms may not be your best solution for finding a mortgage lender. If the idea of using one has just lost its appeal, worry not — there are plenty of other steps you can take to find a lender for your upcoming home purchase.

For one thing, talk to your real estate agent. Chances are, they have relationships with lenders who not only offer competitive rates and fees, but, just as importantly, are easy to work with.

Another good bet is to talk to your friends and neighbors and see which lenders they used. But don’t just ask about rates and closing costs. Those could change over time and could vary based on factors like what your credit score looks like. Rather, ask about what their experience was like on a whole. Did their loans close quickly? Were their lenders responsive? Were there any last-minute surprises that came into play?

Finding the right mortgage lender is an essential part of the home-buying process. If you’re not comfortable trusting an online platform, turn to the people you know and trust, and rely on their advice to help narrow down your choices.

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