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Don't Be A Victim Of Loan Fraud
Protect Yourself from Predatory Lenders
(advice from the U.S. Department of Housing)
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.
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| Knowingly lend
more money than a borrower can afford to repay.
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| Charge high
interest rates to borrowers based on their race or national origin and not on
their credit history.
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| 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.
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| You are asked to
sign a sales contract or loan documents that are blank or that contain
information which is not true.
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| You are told
that the Federal Housing Administration insurance protects you against
property defects or loan fraud - it does not.
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| 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.
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| 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. • Home • Borrow money • Conventional mortgage types • Investor mortgage • Why mortgage rates move • Typical requirements for conventional mortgages • Maximum loan calculator for Conventional Mortgage • Writing a loan request that works • Property Information Wanted by Lenders • FICO credit scoring • Buying a new home advice from HUD • HUD advice on low down loans • Home loan scam • Internet loan scams • Refinance calculator • Mortgage Interest Rates • Option ARM Mortgages • Mortgage brokers scams • Real estate survey • Payday loans • Zero down payment mortgages • Mortgage loan fraud • Financing of commercial real estate • Commercial hard money mortgage • Commercial mortgage applications • Financial ratios • Hard Money Mortgage Qualifier On-line • Rental property 10-year income and expense spreadsheet • Beauty of Hard Money • Reverse mortgage • Foreclosure laws state by state • Real Estate For Sale • Download HUD book on settlement costs • Visit our bookstore • Privacy policy • Change of loan servicing company • |
