Beware Of Predatory Lending Schemes
Most mortgage lenders are reputable and provide a valuable service by allowing families to own a home without saving the thousands or hundreds of thousands of dollars necessary to buy it outright. However, a few, unscrupulous lenders, especially those who make high risk second mortgages, engage in predatory lending practices that can increase the likelihood that a borrower will lose his or her home to foreclosure. These abusive practices include making a mortgage loan to an individual who does not have the income to repay it, charging excessive interest, points and fees or repeatedly refinancing a loan without providing any real value to the borrower.
Borrowers facing unemployment and/or foreclosure are frequent targets of predatory lenders because they are desperate to find any "solution" to their default.
Homeowners frequently receive refinance offers in the mail telling them that they have been "pre-approved" for credit based on the equity in their home. When you are wondering how you are going to pay your mortgage and other bills, it may appear very attractive to borrow against your house. But consider this, if you cannot make your current payments, increasing your debt, even if you get some temporary cash, will make it harder to keep your home.
Beware of Scams:
- Equity skimming: a buyer offers to repay the mortgage or sell the property if you sign over the deed and move out.
- Phony counseling agencies. Some groups calling themselves "counseling agencies" may approach you and offer to perform certain services for a fee. These could well be services you could do for yourself for free, such as negotiating a new payment plan with your lender, or pursuing a pre-foreclosure sale. If you have any doubt about paying for such services, call a HUD-approved housing counseling agency at (800) 569-4287 or TDD (800) 877-8339. Do this before you pay anyone or sign anything. Don't sign any papers you don't fully understand.
- Make sure you get all "promises" in writing.
- Beware of any contract of sale of loan assumption where you are not formally released from liability for your mortgage debt.
- Check with a lawyer or your mortgage company before entering into any deal involving your home.
- If you're selling the house yourself to avoid foreclosure, check to see if there are any complaints against the prospective buyer. You can contact the Arizona Office of the Attorney General Consumer Fraud Unit for this type of information.
- Do not sign anything you do not understand. It is your right and duty to ask questions.
- Information is your best defense against becoming a victim of predatory lending especially for a desperate homeowner!
Where to Report Suspected Predatory Lending – homeowners can contact the Arizona Office of the Attorney General, or call 1(800) 352-8431 to get information on what steps to take to file a complaint. You may also want to look at Predatory Lending Brochure from the Office of the Attorney General.
For more information about Predatory Lending go to:HUD's Predatory Lending Web Site
Predatory Lending Schemes and Scams