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October 24, 2003

Misled by a Lender? Here's What to do

Finding out where to file a mortgage complaint can be as hard as determining which lender is offering a good mortgage deal.

Question: Are there agencies or governing bodies that oversee shady practices of mortgage lenders? What is my recourse in trying to rectify a situation with a misleading lender?
-- Daniel, San Diego

Daniel: Finding out where to file a mortgage complaint can be as hard as determining which lender is offering a good mortgage deal. The problem is that there's no one-stop shop for borrower complaints. Nationally-chartered banks, for example, are regulated by the Office of the Comptroller of the Currency. State-chartered banks, meanwhile, report to their respective state banking departments. Certain institutions, including thrifts and savings and loans, report to additional regulators, like the Office of Thrift Supervision or the Federal Reserve Board. And if all that isn't confusing enough, there are also mortgage brokers, which by some estimates originate half of the nation's home loans. In most states, brokers have to get a license to operate, meaning that complaints should be directed to the state's banking regulator.

The upshot is that if you've got a complaint, the first thing you'll have to do is find out who regulates the institution that gave you your loan. Usually, this information is available on the company's web site. If not, you can always call the lender or broker directly.

Next, you'll need to go to the web site of the relevant regulator. These sites provide information on whom to call and, in some cases, you can even file the complaints online. Unfortunately, just finding the web site can sometimes be a chore, since not all state banking departments use an obvious name. The California banking department, for example, is known as the California Department of Financial Institutions.

Of course, complaining doesn't always yield results. But it's not totally useless, either. The Office of the Comptroller of the Currency, for example, says it returned nearly $6 million in fees and charges to national-bank customers last year. The regulator also has won numerous restitution settlements for consumers from banks that engaged in unfair and deceptive marketing practices.

Unfortunately, despite all these suggestions, the best way to save yourself from shady lending practices is to avoid unscrupulous lenders in the first place. While that's often easier said than done, in some cases it can be achieved by applying common sense when hammering out the details of your loan.

"If you're dealing with someone and you have to wonder if they're OK, you might just need to go somewhere else," says Michael Moskowitz, president of Equity Now, a New York-based mortgage lender that serves several states including New York, Connecticut, Massachusetts and Florida. "If the loan sounds too good to be true, it probably is."