Whenever I look through mortgage documents, my goal is ultimately to find things that can be used by a lawyer to help a borrower. One of the more straightforward findings that can be used to help a borrower is breach of contract by a mortgage broker, lender, or servicer. The most common breaches is “bait and switch” by a mortgage broker or lender. Bait and switch schemes have been around since the dawn of time. The most important factors when examining mortgage bait and switch schemes are time, reason, and documentation. In order to identify things that can help a borrower, here is how I analyze these factors.
Time is actually the most important factor. Time determines if you need to meet the burden of proof of an oral or written contract, or if you can even file a lawsuit within the statute of limitations for your findings. If the burden of proof is a written contract, where is the letterhead, sign, seal, or stamp for the collective agreement? Are the documents in agreement?
Reason is a tricky one. There are a lot of reasons for mortgage terms to change. A lower than expected appraisal value is the most common, but certainly not the only reason. If a borrower 
led a mortgage broker or lender astray with an inaccurate initial mortgage application, it is going to be much harder for that borrower to say they were wronged by not obtaining the promised rate, unless the errors were not material. I have many years of experience as a mortgage broker, so reason is something fairly apparent to me upon review of the overall file (I have overseen roughly a thousand mortgage originations). Reason is often fairly apparent on bait and switch cases. As an example, say a borrower was promised a low fixed rate for five years through closing. A broker contract and rate lock at closing confirmed this. Instead, that borrower was given the rate only as a fixed payment rate on a higher interest option arm.
Documentation is also of great importance. Having a borrower tell you they remember that they were promised a 6% fixed interest rate, and seeing no documentation to prove this only allows you to say that the documentation is not there to verify the bait and switch, and that X,Y,Z documents need to be obtained first. Not every stack of documents you receive will be complete, and it is necessary to know what documents are missing but likely exist, and where they can be obtained.
Ultimately, the goal is to identify things usable by a lawyer to help people. In order to do that, you can’t just state that a bait and switch occurred. You need to examine how, when, and why it occurred, and how to prove your findings. If you have questions on this article or wish to speak with us, contact us here!
