Don't Be A Victim Of Loan Fraud
Don't Be A Victim Of Loan Fraud
Don't
Be A Victim Of Loan Fraud
Protect
Yourself from Predatory Lenders
Buying
or refinancing your home may be one of the most important and complex financial
decisions you'll ever make. Many lenders, appraisers, and real estate professionals
stand ready to help you get a nice home and a great loan. However, you need
to understand the home buying process to be a smart consumer. Every year, misinformed
homebuyers, often first-time purchasers or seniors, become victims of predatory
lending or loan fraud.
Don't let
this happen to you!
11 Tips On Being A Smart Consumer
- Before you buy
a home, attend a homeownership education course offered by the U.S. Department
of Housing and Urban Development (HUD)-approved, non-profit
counseling agencies.
- Interview several
real estate professionals (agents), and ask for and check references before
you select one to help you buy or sell a home.
- Get information
about the prices of other homes in the neighborhood. Don't be fooled into
paying too much.
- Hire a properly
qualified and licensed home inspector to carefully inspect the property before
you are obligated to buy. Determine whether you or the seller is going to
be responsible for paying for the repairs. If you have to pay for the repairs,
determine whether or not you can afford to make them.
- Shop for a lender
and compare costs. Be suspicious if anyone tries to steer you to just one
lender.
- Do NOT let anyone
persuade you to make a false statement on your loan application, such as overstating
your income, the source of your downpayment, failing to disclose the nature
and amount of your debts, or even how long you have been employed. When you
apply for a mortgage loan, every piece of information that you submit must
be accurate and complete. Lying on a mortgage application is fraud and may
result in criminal penalties.
- Do NOT let anyone
convince you to borrow more money than you know you can afford to repay. If
you get behind on your payments, you risk losing your house and all of the
money you put into your property.
- Never sign a
blank document or a document containing blanks. If information is inserted
by someone else after you have signed, you may still be bound to the terms
of the contract. Insert "N/A" (i.e., not applicable) or cross through
any blanks.
- Read everything
carefully and ask questions. Do not sign anything that you don't understand.
Before signing, have your contract and loan agreement reviewed by an attorney
skilled in real estate law, consult with a trusted real estate professional
or ask for help from a housing counselor with a HUD-approved agency. If you
cannot afford an attorney, take your documents to the HUD-approved
housing counseling agency near you to find out if they will review the
documents or can refer you to an attorney who will help you for free or at
low cost.
- Be suspicious
when the cost of a home improvement goes up if you don't accept the contractor's
financing.
- Be honest about
your intention to occupy the house. Stating that you plan to live there when,
in fact, you are not (because you intend to rent the house to someone else
or fix it up and resell it) violates federal law and is a crime.
What is Predatory Lending?
In communities
across America, people are losing their homes and their investments because
of predatory lenders, appraisers, mortgage brokers and home improvement contractors
who:
- Sell properties
for much more than they are worth using false appraisals.
- Encourage borrowers
to lie about their income, expenses, or cash available for downpayments in
order to get a loan.
- Knowingly lend
more money than a borrower can afford to repay.
- Charge high
interest rates to borrowers based on their race or national origin and not
on their credit history.
- Pressure borrowers
to accept higher-risk loans such as balloon loans, interest only payments,
and steep pre-payment penalties.
- Target vulnerable
borrowers to cash-out refinances offers when they know borrowers are in need
of cash due to medical, unemployment or debt problems.
- "Strip"
homeowners' equity from their homes by convincing them to refinance again
and again when there is no benefit to the borrower.
- Use high pressure
sales tactics to sell home improvements and then finance them at high interest
rates.
What Tactics Do Predators Use?
- A lender or
investor tells you that they are your only chance of getting a loan or owning
a home. You should be able to take your time to shop around and compare prices
and houses.
- The house you
are buying costs a lot more than other homes in the neighborhood, but isn't
any bigger or better.
- You are asked
to sign a sales contract or loan documents that are blank or that contain
information which is not true.
- You are told
that the Federal Housing Administration insurance protects you against property
defects or loan fraud - it does not.
- The cost or
loan terms at closing are not what you agreed to.
- You are told
that refinancing can solve your credit or money problems.
- You are told
that you can only get a good deal on a home improvement if you finance it
with a particular lender.
Remember:
If a deal to buy,
repair or refinance a house sounds too good to be true, it usually is!
Housing counselors
working at HUD-approved agencies can help you be a smart consumer. To find a
counselor near you, call (800) 569-4287 or go to HUD's
housing counselors list online.