Beware of
deceptive lenders who encourage you to tap
into the equity of your home, but who fail
to mention that your home is serving as
collateral for your loan. Such lenders
typically target the elderly or those with
low income or credit problems.
Here is a
summary of some of the most common scams:
Equity
Stripping:
The
lender will encourage you to put down on
your loan application that you make more
than you actually do, knowing that your
monthly income isn't enough to make payments
on the loan. If you default on the loan,
they will foreclose and take your home.
Loan
Flipping:
In this
scenario, the lender will encourage you to
repeatedly
refinance by tempting you with
more money each time. With each refinancing,
they may charge higher points and
origination fees and increase your interest
rate. The extra money that you were able to
borrow may not be enough to recover the
refinancing costs. With each successive
loan, you get deeper and deeper into
debt,
and if you default, you will lose your home.
More Here
Credit
Insurance Packing:
At
closing, the lender will give you papers to
sign that include charges for credit
insurance or other "benefits" that you
didn't ask for and don't need. They trust
that like most people, you will not read the
fine print. If you do happen to notice, they
may use scare tactics and tell you that
refusing to pay the credit insurance may
result in a delay or a rejection of your
loan.
Deceptive
Loan Servicing:
The
lender will try to confuse you by failing to
provide you with accurate or complete
account statements and payoff figures,
keeping you in the dark on how much you have
already paid and how much you still owe. Or
they may send you letters after your loan
has been approved telling you that your
monthly payments will be higher than
expected, or add on taxes and insurance fees
that you have already paid for, late fees
even though your payments are on time, or
they may try to confuse you with legal fees
you don't understand.
The Home
Improvement Plan:
A
contractor will knock on your door and offer
to renovate your home, and tells you that
they can arrange financing through a lender.
Once they start work, they will give you
papers to sign, telling you that if you
don't sign, they will stop renovations. You
sign the papers, unawares that you have
agreed to a home equity loan, with high
points, fees and interest. The contractor
may have done a shoddy job, but now that
you've already signed, they may stop showing
up for work altogether.
Signing
Over Your Deed:
You are
having trouble making payments on your
mortgage and your lender threatens to
foreclose. Another "lender" will contact you
and offer to help you find new financing. In
the meantime, they want you to sign over the
deed to your house, telling you that it's
the only way to avoid foreclosure. Once
you've signed over your deed, the lender
will treat your property like their own, and
you will be paying rent to them. If your
payments are late, they can evict you.
Mortgage Tricks and Trip Ups
In order to protect yourself
from these potential scams
Never:
-
Agree to a home equity
loan if you can't afford the monthly
payments.
-
Feel that you have to
give in to pressure to sign anything.
-
Sign documents that you
haven't read over carefully or that have
blank spaces that can be filled in
afterwards.
-
Agree to a loan that has
extra charges or that include terms that
you didn't originally agree to.
-
Deed your property to
anyone without talking to your attorney
first.
Always:
-
Demand an explanation of
any terms or fees that you don't
understand or that seem unfamiliar.
-
Shop around for credit
insurance. You can often get a better
deal if you buy from someplace other
than the lender.
-
Keep records of your
billing statements and canceled checks
of your monthly payments.
-
Check contractor's
references before having work done on
your home, and get a second opinion.
-
Keep a copy of everything
that you sign.
-
Check your local Better
Business Bureau, state licensing
authority, Chamber of Commerce, or a
consumer protection agency to make sure
you are dealing with a reputable lender.
Mortgage Glossary4
