BusinessFebruary 11, 2004

Julie Garton-Good

QUESTION: We received a promotional flier from a bank offering a mortgage loan at interest rates far below normal. The flier said the rates were good only when applying over the Internet. But when I accessed the site and tried to find a physical address for the lender, it was a dead end. All I could find was a reference to a state.

Telephone directory assistance for the major cities in that state found no company by that name, and it was the same with a toll free directory. I'm beginning to wonder if it's a legitimate bank.

Is there a quick way I can check out their identity, especially to see if they're a federally insured institution? -- ML

ANSWER: Yes, there is. While it's not unusual for a lender to offer discounted rates to mortgage loan applicants applying via the Web, it is somewhat unusual not to be able to locate an institution by a physical address and/or phone number. This information is most often found at the "About" button and/or at "Contact Us" on a Web site.

Fortunately, there's a great one-stop-site that can provide the answer to whether or not the financial institution is legitimate. It's the Web site for the Federal Deposit Insurance Corporation (FDIC) at www.fdic.gov.

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Commercial banks and savings associations are chartered by either federal or state government in order to legally solicit deposits in the United States.

Additionally, most legally chartered depositories are members of the FDIC that insures deposits up to $100,000 per account. The FDIC Web site allows consumers to learn more about banks they're considering doing business with as well as report adverse experiences a consumer has had with a particular financial institution. If the online lender you're considering isn't a legitimate bank, offering an abnormally low interest rate could be one way to lure unsuspecting consumers.

The Web site www.fdic.gov/deposit/index.html allows users to search a database containing all the names of FDIC institutions nationwide. Just click on "Learn More/Is My Bank Insured?" If you still have no luck finding the bank in question, you can send an email directly to their consumer resources department to do more research for you and report back their findings. While you're on the FDIC Web site, you might want to check out the information section/link on how to best evaluate the mortgage loan you're considering. The information is concise, very consumer friendly, and provides you with lots of links including access to free consumer booklets.

If you'd like to speak to a real person over the phone, you may call the FDIC's consumer call center toll-free at (877) ASKFDIC (275-3342) from 5 a.m. to 5 p.m. PST. The representative can also help determine if filing a "suspicious Internet banking site" report is in order. While you can do this anonymously, the FDIC would prefer to have your name in case there are follow-up questions they need to ask.

With more and more lenders offering online mortgage lending, it's smart and necessary to do your homework before proceeding with a mortgage application no matter how low the interest rate.

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