Vol. 24 - My Experiences With Unfair Lending Practices
I share my frustration with the lending process I am currently undergoing. We discuss:
How predatory lending is illegal but still very prevalent.
How to proactively guard against unfair lending practices.
Knowing your rights through the lending process.
How to report lenders.
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TRANSCRIPT:
Naseema McElroy: [00:00:00] Oh, all right. Nurses, fire. We are back with our certified financial planner and Lisa Peterson. And we're back today and I am a little heated right now and I'll tell you why. So, we talked about lending discrimination, a couple episodes back and briefly mentioned that I was going through the process and felt it, but I want to do a little bit deeper dive.
In this episode and talk more about the specifics of what's going on and how this can help you so that when you're buying a home. You won't be a victim of these things. So let my testimony save you from being screwed, by predatory lending, that's still going on. And so, mortgage discrimination is.
Real and prevalent thing is technically illegal, but it's still happening right now. So it was banned in what, 1968, by the fair housing laws that were put in place. It's part of like the civil rights movement, but they still find ways like. All the predetory lending that was happening that affected
predominantly people of color in the last great recession, like, but it's still happening, even though people will tell you that there's no way that they can discriminate against you because. Oh, it's just based off of your credit score and your down payment. So, Hey Lisa,
Leisa Peterson: [00:01:40] Hey,
Naseema McElroy: [00:01:42] obviously, obviously I'm like talking too much because I'm like all the way he did, but.
Leisa Peterson: [00:01:50] You know, this happens in life. People people know, and they can relate to you. Cause we have all been in this position where we feel a sense of oppression. And yet we really struggle with knowing what to do with it. And I feel like that's part of this conversation.
Naseema McElroy: [00:02:08] Yeah. And I think this is the most important part.
And, we talked about it last time, but like knowing and having that feeling like you're not being treated fairly, but not having the words or the context to explain it, but just thinking that maybe you're tripping or maybe you don't want to speak up and be the BI TCH or looked at as that angry person, because you're speaking up and you kinda just like.
Except it, it is what it is like a lot of times. I mean, and this is just in general. I, and I, and we talked about this Lisa, like with all the stuff that's kind of happening with, police brutality with the things that go on just in our community that are oppressive, we kind of just. Suck it up and say, you know what, this is the black tax.
Like the, it is what it is. And we kind of keep on going and like, it gets to a point where enough is enough. And I think that, you know, now as a country, like we've kind of came to that conclusion, like collectively and, yeah, and for me, it just got to a point where. I'm there because it's happened to me over and over again.
And I was even sharing with you when I was, some. Secret, no big secret. I'm working on a book. And so one of the chapters I'm little section five was talking about in the book when it's Linden discrimination. So of course I had to go back and do some research and like, make sure I had my dates right.
About, you know, when laws were enacted and all this kind of stuff. And I'm reading through like, What counts as lending discrimination. And I just keep on getting hit over and over about examples that have happened to me, like in this present situation and in the past where, these things are indications of discrimination, and.
I'm tired. but now I'm just like pissed off. But at the same time, I'm just like, this is information that I think you guys like need to know. You need to know what fines are. You need to know proactively the questions to ask, but also who to report these instances to so that it stops happening.
And so that's what we're going to talk about. Well,
Leisa Peterson: [00:04:32] when you first bought it, your house, I imagine there was something, that was offered up as you were negotiating. It's a brand new home. You were working with the builder to come up with your deal and they put an offer before you, that was. To incentivize you to work with their lender versus any lender that you choose.
And they cannot restrict that anyways. So they used money to encourage you. Let's just use that. Like, we're going to give you $10,000 and that's going to help you out if you work with our lender. Is that, did I get that right?
Naseema McElroy: [00:05:13] Yeah, exactly. So, yeah. when I'm presented the deal, they're just like, Oh, there's like these bonuses and these bonuses.
And if you go through Pulte mortgage, you'll get this $10,000 build their credit, that comes along with it. And so I'm like, yeah, I already have a lender that I work with and that I'm very comfortable with. but I was just like, Oh, it's a no brainer that I would go through them because I mean, like, if they're offering the best rates, like, plus I get this $10,000, like that just makes sense.
So it doesn't even make sense and supposed to be a super streamlined process. So it just makes sense for me to go through them. but it hasn't, it wasn't a streamline process. It was actually a very grueling process where, you know, and not saying that. Going through any kind of process wasn't, isn't grueling, you know, you're disclosing all kinds of financial information.
They're asking you for this. They're asking you for a line items in your bank statement, like where did this money come from? I mean, they want to make sure that is no kind of fraud on your end, that's coming through and they want to make sure that you can ultimately afford the mortgage.
So they're doing their due diligence. But when they're not responding in a timely fashion, they're dragging their through this mortgage process and they're blaming it on external factors. So, I've purchased this house in may. It's now the end of July and I have yet to get an approval.
I questioned it internally. I went and said, you know, after they kept on asking me for documents, which I didn't feel like was relevant and they pulled my conditional. Approval on my loan. I actually went into them and I asked to speak to a compliance officer with the lens for diversity and inclusion and talk to her about the processes.
She even recommended that, you know, like I look outside and see if I can get competitive rates. And so I did, I reached out to the lender who I usually work with. And not only did she give me a rate that was almost a whole percentage point cheaper. She was able to get me approved, totally approved for the loan in a week.
when these people have been dragging their feet with all the same documentation with all the same transactions, then my bank account, I was able to get approved at a lower rate, knowing that when using an outside lender, I would lose that $10,000 credit. So I went back to the builders mortgage company.
And I said, you know, this is the right that I got. Here's the truth. And lending statement here are all the fees. And they were like, yeah, we can match that. And then they went ahead and matched the rate. But with a buy down or they put points on my mortgage points on, on what is it called? The origination fees on there at closing, I would have to agree $10,000.
So it looked like they were presenting this apples to apples, picture because they're saying, well, you know, if you go through us then. You'll get this $10,000 incentive, but no, it's not. It's what you said, Lisa, and there's a perfect word for it. It's extortion because it's making you take this loan, which outside of, if you take it out of this, take it out of this context.
It wouldn't make sense, right. If you're comparing,
Leisa Peterson: [00:08:45] right. Cause they moved the money. They, they said, we're going to give you $10,000 as an incentive in let's say closing costs. But in reality, they weren't giving you anything. That's what's coming out through the process. They literally will like. Saying well, in reality, to get a comparable rate out of our system, it would cost you $10,000, which basically means that the money that they offered you isn't even for real, it just disappeared overnight.
and one of the things I think that we're learning through this process, There's actually several things. Is it okay if I just share a couple things that I picked up from what you described? So number one is, is this was a good lesson for both of us to say that when we go into an arrangement and somebody is offering a financial incentive, especially in a home buying situation where they're wanting you to use their lender, The question now, in retrospect, that would be, where is that money coming from?
And is it just being moved over and I'm being charged more for the rate and it really doesn't exist. Like just asking the question, like where does that money come from? Who's paying it. And how do I make sure that that's really, really going to be money that I am receiving? Cause that's how you interpreted it.
Correct? Like it's $10,000 to me and there's not going to be any cost. I'm not going to get a, they didn't say we're going to give you $10,000 and you're going to have a higher rate. I'm just making sure everybody's listening and hearing this. Right. They didn't say that. They said you're going to get a comparable rate.
And you're going to get $10,000, but now the story has changed. So that's one thing. The other thing I just want to mention, and we did not talk about this, but you're probably not going to love this, but I'm going to still say it anyways. We talked about the subjectivity in the pricing in our last episode, right?
That, that there's this wiggle room where people can charge more. If they think that you'll pay more, right. The wiggle room and the pricing. Unfortunately the whole entire mortgage underwriting process is incredibly subjective, too. Meaning, they can ask one person for a document and not have to ask another person for that same document.
And I think this is the part where it's so freaking subjective. That you won't know if somebody is like, I'm going to give you the benefit of the doubt because you're a doctor and maybe have white skin and whatever, or. I'm going to ask for more documentation from you, because this is what you look like, or this is what your profession is or whatever it is like they have that discrimination in every single loan.
So I think I'm just sharing this because I didn't say it before, but I just want to be clear. There is incredible subjectivity. And because I know so much when I go into negotiate a mortgage. I call them out on everything. So like the question I said, you know, where's that money coming from and how is this going to affect me?
And why are you charging these fees? And like all that is one part of it. But the other part is, is I need you to explain why you need that documentation and why it's so necessary. And then they've got to, there's no reason why you can't ask those questions. So I'm not sure if this is helpful at all, but I just.
Naseema McElroy: [00:12:18] But I did. And I did ask that question and that was part of that first like chain of emails that I sent out before I even shopped around, it was like, Why are you asking me for this? I think that this is unnecessary information I provided voluntarily provided X, Y, and Z information. And these documents, why are you still asking me for more?
And then they went back and retracted and said, Oh yeah, we don't need these documents. And so I, I do know that. Yeah. Yeah. You know that, and, and. I know that, because now I've been through two different processes with underwriters, and I know that there's certain things, one person will ask for that, another person won't.
And so, yeah, I get it. I get it.
Leisa Peterson: [00:13:08] Right. Yeah. And I mean, I hate that talking about this stuff, quite frankly, but I also feel like what we're trying to do in our conversations is bring to light that the importance of maybe trusting. And I know one thing you shared before we got on the call was. It's hard to be doing this.
It's exhausting and frustrating. Yeah. but yeah, I mean, you were just, I don't know where you'll cut it, but I'll just say, you were just saying that it's frustrating to always feel like you, you have to be on guard, like, like asking all these questions and, you know, hopefully it won't always be this way, but I think that as a woman, you know, as a person of color, I mean, I think we just owe it to ourselves to be really educated about this process when we go through it, you know, so that maybe it's easier.
and, and you end up getting the best deal that you possibly can. Cause that's all, we're, we're wanting people to have a streamline of process as possible. And then also getting a great rate,
Naseema McElroy: [00:14:15] right? Because like I'm saying access to affordable lending. Is super important, for wealth building, especially if we have to depend on financing, which a lot of people who are just coming into, even the ability to just step outside of poverty, have to depend on.
We are not getting passed down inheritances. We're not given money in the back end for down payments. I mean, so a lot of our wealth has to come from leverage and using, you know, our good incomes and our good credit, because we finally got there to be able to. Get affordable finance and that, and, that's super important.
And other people's ability to get affordable financing is what has helped them build wealth and be able to pass down a legacy to their family. But yeah, it's being denied to so many people of color. And so, I mean, like to highlight this again is not to get people upset, as upset as me and riled up, but I'm only upset because like, it's frustrating to me that I only know this because.
Now I'm so ingrained in this personal finance space that I'm actually paying attention, but my avatar, my audience does not know this. And so I'm mad for them. You know, I'm mad for the people that continuously get taken advantage of over and over again. and we'll continue unless we step up and we actually do something about it.
And so let's talk about the ways that we can do something about it again. Yes. And, so Lisa, so on the pro preventatives, I, on the proactive side, before you even get into these deals, what kind of questions should you be asking?
Leisa Peterson: [00:16:23] Well, I think that the big one that we explored is the importance of when you decide you're going to buy a house, you need a mortgage.
First of all, I like getting preapproved before you even go out to look for a home. So you gotta be careful because you've got a 30 day window in which to pull multiple credit reports and shop around. But there's huge merit in already having a letter. And we used to tell people this, if you're going to buy a house, do that work beforehand.
So when you go in to make your offer, it's already clear that you have a conditional approval based on, you know, a certain amount and so forth. It makes your offers more attractive. You've already got a relationship and you've got a baseline. Then after you get something in contract, Then you can go out and again, that's when you do your, your shopping, you're like, yeah, I'm ready to lock it in.
You're gonna ask it's all your questions. You're going to compare your truth and lendings next to each other. You're going to make sure that there is no funny business, right? Something's weird. You're going to call it people out on it and say, I don't understand this. And that is like the best thing you can say to financial people.
Is, I don't understand this, but I need you to walk me through line item by line item, why these things are being charged and then you become empowered. I think just, I'm just saying this out loud, like you don't become disempowered by asking that question. You actually show them that you're not going to let anything cross.
Past you without diligence. And it's setting a tone for how you want that person to think of you, that nothing's gonna pass you by. Does that happen?
Naseema McElroy: [00:18:04] Yes, definitely. Definitely. And, yeah, I think that's the one part that I didn't do. And usually I do, but I wasn't really expecting a house, but yeah. I mean, like I should have, you know, came there with a preapproval, which I could've easily gotten, but like I said, they make the offer so enticing it's like.
Why wouldn't you and, you know, that's like new housing, you know, like when people go to new housing and they're just like, yeah, I can afford this. Like, that's totally the lore. And so it's not the lifter's fault, you know, like they're just presenting a product for you to buy and they know how to sell it in a way that, you know, it's kind of irresistible.
So that's marketing, that's good advertising, you know?
Leisa Peterson: [00:18:47] Yeah. And I just want to say, you know, hence why I left the industry. There's just a lot of not good stuff going on out there, like this whole switching and saying, we're going to give you 10,000 and then it goes away like that is. Par for the industry.
Like this is why we have to approach it with buyer beware. And this applies to no matter who you are, this is going on for everybody. Okay. This is why we talk so much about
Naseema McElroy: [00:19:17] empowerment. Yes. Yes. And then, yeah, in the back end, I just want to leave you with some tools. Cool. So if at any point you feel like lending discrimination is going on, your resources will be to contact your state attorney general office, and they might have some extra laws, some equal opportunity laws in place, and be able to advise you on your rights.
That's number one, number two. File a complaint against the consumer financial protection Bureau. Get a third party. I got that. And they also have just like a collection of discrimination claims already out there. In advance. You want to look and see has this mortgage company already had some complaints out.
And then you're also able to reach out to the, how to HUD, for fair housing and equal opportunity. They're fair housing, equal opportunity office, to file a complaint as well. if you call under like hood got the guidelines. So those are the resources, that. Even if you're like questioning, is this discrimination or if it isn't, I think that, this isn't going to change unless you actually file against these people and, and you take it seriously because, it will be easy for me to be like, you know what?
This is just easier. I'll just, you know, go with this rate, which I know I might've done. You know, but, you know, a couple of years ago, but I'm not going to do that. I'm not doing it. I'm not going to sit down. And, you know, if it comes to the point where I have to get a lawyer involved, that's what I'll do because.
I'm not scared and it'll make for a good story. Anyway,
Leisa Peterson: [00:21:12] you're good at taking your own life and sharing it with all of us. So thank you because you got a set. If somebody doesn't do it, then nobody knows.
Naseema McElroy: [00:21:22] Exactly. All right. You know, a lot of people go through it and they don't talk about it. So I keep not happening over and over. And my whole goal is just to prevent people from making the same mistakes that I do so that they can accelerate to a path to financial freedom.
Even faster than I can. And, you know, I don't mind being the Guinea pig. That's what I'm here for I feel like that's my karma, my destiny to serve other people, to use my story as a testimony so that people can live better lives and know what rights that they have, because I feel like, you know, we've been disempowered for so long.
I mean, as women, as people of color, just in general, it's time to turn things around. And so whatever little thing that I can do, any little thing that can happens in my life, I can help just even one person. I'm always down to share a story and also to share actionable, like items that you can do, things that you can do in order to make sure that.
It doesn't happen to you. Like, not just talk about, you know, the subjective, like really give you things, tools that you can use to benefit you. So that's what I'm about. Yeah.
Leisa Peterson: [00:22:47] So beautiful. It's so beautiful. And you're so inspiring. And I mean, I do, I am sorry that It's been as difficult. And I know that if anyone could take your experiences and help other people through it, you you're, you're the one.
And you're really, really good at spreading the word. So thank you. You've always touched my heart and, and you show me things that, you know, I just, I didn't quite realized, and I'm really appreciative of that because I feel like I become a better person learning about it from you.
Naseema McElroy: [00:23:22] Aw. Thanks, Lisa. Thanks for being an ally.
Like always, always like I appreciate you.
Leisa Peterson: [00:23:31] Thanks.
Hey there I’m Naseema
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