WARNING You could lose your home and
your money if you borrow from unscrupulous lenders who offer
you a high-cost loan based on the equity you have in your
home. Certain lenders target homeowners who are elderly or who
have low incomes or credit problems and then try to take
advantage of them by using deceptive practices.
The Federal Trade Commission Cautions
all homeowners to be on the lookout for:
Equity Stripping: The lender gives you
a loan, based on the equity in your home, not on your ability
to repay based on your income. If you can’t make the payments,
you could end up losing your home.
Loan Flipping: The lender encourages
you to repeatedly refinance the loan and often, to borrow more
money. Each time you refinance, you pay additional fees and
interest points. That only serves to increase your debt.
Credit Insurance Packing: The lender
adds credit insurance to your loan, which you may not
need.
Bait and Switch: The lender offers one
set of loan terms when you apply, then pressures you to accept
higher charges when you sign to complete the transaction.
Deceptive Loan Servicing: The lender
doesn’t provide you with accurate or complete account
statements and payoff figures. That makes it almost impossible
for you to determine how much you have paid or how much you
owe. You may pay more than you owe.
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Some of these practices violate federal
credit laws dealing with disclosures about loan terms,
discrimination based on age, gender, marital status, race,
or national origin; and debt collection.
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You also may have additional rights under
state law that would allow you to bring a law suit.
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The FTC suggests if you’re thinking about
using your home as collateral for a loan, be careful. Unless
you can make the loan payments out of current income, you
could lose your home as well as the equity you’ve already
built up.
Some additional tips to remember:
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The lure of extra money or the chance to
reduce monthly credit payments can be very costly in the
long run. High interest rates and other credit costs could
get you in over your head.
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Credit insurance may not be a good deal
from a lender. If you want the added security of credit
insurance, shop around.
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Don’t sign a loan agreement if the terms
are not what you were given when you applied.
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Ask for an explanation of any dollar
amount, term, or condition that you don’t understand.
Federal law is very clear about what credit and loan term
information must be provided in writing when you apply for a
loan and before you sign any agreement.
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In addition, shop around for the best loan
terms and interest rates. Contact lending institutions, such
as banks and credit unions, and consult a legal or financial
advisor, or someone you can trust before you make any loan
decisions. Or contact your local Fair Housing Office, legal
aid, or senior services organization for information and
help.
