What is a bait-and-switch mortgage scheme?

A bait-and-switch mortgage scheme involves a lender advertising very attractive loan terms (low rates, no fees) to lure borrowers in, then changing the terms at or near closing. Borrowers who have invested time and money in the process — paying for appraisals, inspections, and applications — may feel pressure to accept the worsened terms rather than walk away. Federal law (TILA/RESPA) requires lenders to provide a Loan Estimate within 3 days of application and a Closing Disclosure 3 days before closing, specifically to prevent last-minute surprises. Always compare your final Closing Disclosure to your original Loan Estimate and do not hesitate to walk away if terms have materially changed without explanation.