File Complaint Against Mortgage Lender

Q: I used your book, 100 Questions Every First-Time Home Buyer Should Ask, to help me make my first home purchase. I have a question for you regarding my mortgage lender.
 

The question is: If I feel that my lender committed fraud in the processing of my loan, and I make complaints say, to the Better Business Bureau and the state Attorney General's Office, what repercussions could come back to haunt me down the line?

For example, could the lender stop accepting my mortgage payments, and claim that they were never made? Could the lender revoke my mortgage?

I have closed on my home purchase, and will keep my loan, but I feel strongly that the way in which it was processed was not right.

First, I made out the application for an investment home, but the information was altered (lender claims it was an error) and the application that was submitted to the processor stated that I was purchasing a "second home."

This enabled me to get a lower interest rate than with an investment loan, and most likely enabled the loan officer to secure the loan.

But this bothers me because I can't immediately rent out my home, and my insurance is a "Landlord Protector," with my property manager (decided upon but not yet hired) named as an additional insured. But mostly this bothers me because the property is now vacant. If the insurer's inspector makes a random check down the line and finds my property vacant, he could instantly revoke the insurance coverage.

Worse, the actual income I listed on my application was altered. The income that shows up on the form that was submitted to the processor is only about 58 percent of what I actually make, and this is not the amount I submitted on my initial form. I wonder why this was done.

I closed on mid-September in Phoenix. I am back in Japan, and just now, a week later, recently caught this income alteration.

I did bring up the first problem about changing the property from investment to second home to the loan officer who was my only contact throughout the process. The loan officer insists it was an innocent mistake, and has declined to speak to me further about it.

When speaking to my loan officer, she handled the situation in a strange way. To make a long story short, she was not volunteering information and rather, pretended not to know. For example, she seemed not to know which documents would have stated that the application was for an investment property. If she is the lender, it is her job to know which forms contain what information.

I am an American living in Japan, so any problems with lawsuits down the line will be difficult. Thus, my goal is to make it known that this happened with this particular company, but I do not intend to sue. However, my concern is what retaliation the lender might try if I blow the whistle on them.

Should I complain? Whom to? How could the lender retaliate?

A: Your situation is unique in a number of ways. First, I'm not sure why your loan officer changed the application for an investment loan to a second home loan unless the company doesn't deal with the financing of investment property.

But it's also odd that the loan officer would lower your income on the application. Typically, bad lenders put down a false income number that is higher than the actual income in order to help that person qualify for the loan. It makes no sense to me why this would work in reverse for your loan.

I'd call your state attorney general's office to discuss what happened with the lender, as well as the state commission or agency that regulates mortgage lenders. Falsifying income on your application and changing the application without your knowledge and consent is a crime and if the lender did this, and you know it, you should report it.

Typically, the loan won't be unwound unless you were unhappy with it. In fact, the loan has most likely already been sold to a lender on the secondary market.

But I agree that this sort of behavior shouldn't be tolerated.

If you want to publicize your unhappiness with this lender in a more public arena, then you should certainly contact the Better Business Bureau and file a complaint.

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