Tough Times: Beware of Predatory Second Mortgage, Equity Loan, and Other Scams
May 7, 2009
 
URBANA — Homeowners facing unemployment, foreclosure, or both are frequent targets of predatory lenders because their dire economic straits make them desperate to find a "solution" to defaulting on their mortgage, said a University of Illinois Extension consumer and family economics educator.

"Most mortgage lenders are reputable businessmen and women who provide a service by allowing families to own a home without saving the thousands of dollars necessary to buy it outright. But a few unscrupulous lenders make high-risk second mortgages that increase the likelihood the borrower will lose his home to foreclosure," said Susan Taylor.

"Homeowners may receive refinance offers in the mail telling them they've been pre-approved for credit based on the equity in their home. And borrowing against your house may seem like an attractive idea when you're wondering how to pay your mortgage and other bills," she added.

"But consider this: if you can't make your current payments, increasing your debt will only make it harder to keep your home," she said.

Beware of these scams:

• Equity skimming--when a buyer offers to repay the mortgage or sell the property if you sign over the deed and move out.

• Phony counseling agencies, which offer counseling for a fee when it is often given at no charge. Check with a local U.S. Department of Housing and Urban Development (HUD) counselor in your area. You can access the list of counselors by visiting http://www.hud.gov or call HUD Approved Housing at 1-800-569-4287.

• Don't sign anything you don't understand. Asking questions is your right and your duty.

• Remember, information is your best defense against becoming a victim of predatory lending.

Other abusive lending practices include:

• Making a mortgage loan to a person who doesn't have the income to repay it

• Charging excessive interest, points, and fees

• Repeatedly refinancing a loan without providing any real value to the borrower

To report suspected predatory lending, homeowners can either visit the Stop Mortgage Fraud website (http://www.homeloanlearningcenter.com/ConsumerHelpDesk/) or call 1-800-348-3931 to learn how to file a complaint. If you call, you'll receive a brochure that contains information also found on the website.

For more information on preventing foreclosure, visit U of I Extension's "Getting Through Tough Financial Times" website at http://www.ToughTimes.illinois.edu. "You'll also find advice on which bills to pay first, how to talk to creditors, saving food dollars, handling stress, and more," said Taylor.

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