A few days ago, Michelle Singletary of the Washington Post wrote an op-ed piece entitled “A 400 Percent Return in 7 Days? Riiiight.” After briefly discussing the difference between pyramid promotions – which are illegal – and multilevel marketing schemes – which are not, Singletary moves on to describe a suspicious meeting she recently sat in on.
The speaker was a representative of Financial Independence Group, a multilevel marketing scheme that preys on homeowners. Basically, you have to pay to join, but you have the potential to earn 400 percent of your initial membership fee if you can convince five more people to join…and if two of those five refinance their homes through Financial Independence.
Of course, Singletary did some snooping around, and found out some things that seemed rather suspicious. For instance:
- Financial Independence claims not to be a mortgage broker, yet they send out applications requiring employment history and other information needed to process a loan.
- Financial Independence’s application also requires a $425 application fee!
- Members are encouraged to dunk their home equity into risky investments.
- Members can also earn “by giving wealth-building presentations.” (Read: by deluding other homeowners.)
- In order to find out more about membership, you have to become a member.
- The company has supposedly been in business for 10 years, yet Singletary couldn’t find any record of the company earlier than 2006.
- Although Financial Independence’s purpose is supposedly to provide financial advice to members, they refused to give Singletary the names and credentials of their financial advisors.
- In fact, every time Singletary asked for more specific information about the company, her questions were sidestepped or outright refused.
Reading this article, it is obvious how important it is for homebuyers and homeowners to know what to look for in a mortgage broker. As with any business that has the potential for lots of money, scams abound, and it is far too easy to get taken advantage of.
Here are a few ways to protect yourself from dishonest mortgage schemes and services:
- Always make sure the person you are giving your information to is licensed, whether they are a mortgage broker or a loan originator.
- Always check all the details of the deal you are being offered. If the mortgage broker sidesteps your question or redirects your attention to how happy the new loan is going to make you, get out fast!
- Avoid anything with an abnormally high price tag, such as home-buying seminars, membership applications, and financial “advice.”
- Always check brokers or other businesses out with the Better Business Bureau before committing to anything. Often even a simple Google search can dig up dirt on a shady company.
Whether you are buying a new home or refinancing an old one, doing your homework can help you make sure that you never get “taken” by an unscrupulous mortgage broker!
Thank you to Logan Chierotti, from www.ColoradoHomeHelper.com, for contributing this blog post.
Keith Munsell 
