Home Equity Scams For You

A home is the most                approved. As soon as the borrower  expensive investment most       fails to meet the monthly          people will ever own. For       payment, the lender forecloses,    cash-strapped homeowners a home       stripping the borrower of all the  equity loan is a temptingly easy      equity in the home. Low-income     way to get cash. However, some        homeowners should beware of        home equity lenders are               lenders who encourage them to      dishonest, and gullible consumers     accept loans which they cannot     are at risk of losing their           afford to repay.                   biggest asset. Borrowers should                                          be wary of unscrupulous lenders       Another tactic is the balloon      and their scams to avoid losing       payment. A borrower who is         their homes.                          falling behind in mortgage                                               payments is offered mortgage       Financially unsophisticated           refinancing at a lower monthly     homeowners, such as the elderly,      payment. However, the payments     members of minority groups and        are lower because they cover only  people with poor credit ratings,      the loan interest. At the end of   are often targeted by                 the loan term, the principal       unscrupulous lenders using            -that is, the entire amount of     unethical lending practices.          the loan -is due in one lump sum                                         called a balloon payment. If the   One tactic used is called "equity     borrowers cannot make the balloon  stripping". In this instance,         payment or refinance, the home is  cash-strapped prospective             foreclosed.                        borrowers who the lender knows                                           cannot met the monthly payments       Loan flipping is another           are encouraged to exaggerate          deceptive practice. The company    their income on the application       holding a homeowner's mortgage     form to help get the loan             offers to refinance in order to    give the homeowner extra cash,        Credit Insurance Packing is the    but charges high points and fees      charging of extra fees at the      for doing so. The extra cash          closing of a mortgage. A           received may be less than the         homeowner and a lender come to an  additional costs and fees charged     agreement on a mortgage, but at    for the refinancing; moreover,        closing, the lender tacks on       interest must be paid on the          charges for credit insurance or    extra charges.                        other "benefits" that the                                                borrower did not ask for and did   Home improvement scams are very       not discuss. The lender hopes the  common. A contractor offers to        borrower won't notice this, and    install a new roof or remodel a       just sign the loan papers with     kitchen at a price that sounds        the extra charges included. If     reasonable, and offers financing      the borrower questions the last    through a lender he knows.            minute charges, the lender may     Sometimes the contractor even         state that the charges are         attempts to get the homeowner to      standard policy for all loans,     sign blank contract forms with        and if objections continue, the    the promise they will be filled       lender will claim that it will     in later when the contractor is       take several days to draw up a     "less busy". Often, the rates         new contract, or that the bank     offered are not competitive, and      manager may reconsider the loan    as soon as the contractor has         altogether. Due to these           been paid by the lender, he has       last-minute pressure tactics, the  no interest in completing the job     loan may wind up costing           to the homeowner's satisfaction.      considerably more than initially   The homeowner is left with            stated. Borrowers who agree to     unfinished or shoddy work and a       buy the insurance are paying       large loan to pay off.                extra for a product they may not                                         want or need.                                                            lender makes it almost impossible  Mortgage Servicing Abuses occur       to determine how much has been     after the mortgage has been           paid and how much is still owing   closed. Borrowers get bills from      on the loan.                       mortgage companies for payments                                          such as escrow for taxes and          Homeowners should avoid signing    insurance even though the             over the deed to their properties  homeowner agreed beforehand with      to lenders under any               the lender to pay those items         circumstances. If a borrower is    themselves. Bills arrive for late     in danger of foreclosure, a        fees, even though payments were       second "lender" may offer to help  made on time. Or a message may        prevent the loss of the home, if   arrive saying that the homeowner      only the homeowner will sign over  failed to maintain required           the property as a "temporary"      property insurance and the lender     measure. The promised refinancing  is buying more costly insurance       never arrives, and the lender now  at the homeowner's expense. Other     owns the property. Once the        unexplained charges such as legal     lender has the deed to your        fees are added to the amount          property, he can treat it as his   owing, increasing the monthly         own. He may borrow against it or   payments or the amount owing at       even sell it to someone else. The  the end of the loan term. The         borrower no longer owns the home,  lender does not provide an            and will receive no money when it  accurate or complete account of       is sold. The lender can treat the  these charges. When homeowners        borrower as a tenant and the       get tired of these tactics and        mortgage payments as rent. If the  ask for a payoff statement in         "rent" payments are late, the      order to refinance with another       borrower can be evicted.           lender, they receive inaccurate                                          or incomplete statements. The         To protect against unethical       lending practices, homeowners         for the best rates. Keep careful   should never agree to loans           records of all payments,           beyond the means of their monthly     including billing statements and   income; sign any documents before     canceled checks. Challenge any     reading the fine print; or let        inaccurate charges; many           any lender pressure them into         companies hope that borrowers      signing immediately. Never allow      will simply not be bothered.       the promise of extra cash or                                             lower monthly payments get in the     Hire contractors only after        way of good financial judgment.       checking their references, and     If a loan sounds too good to be       get more than one estimate for     true, it probably is.                 any job.                                                                 Borrowers who are financially      Always ask specifically if credit     inexperienced should consider      insurance is required as a            consulting with an accountant or   condition of the loan. If the         an attorney before signing a       added security of credit              loan.                              insurance is desired, shop around      About the Author: J Schipper is interested in Home Equity Home Loans Mortgage Refinance Source: www.isnare.com