Unscrupulous Lending Companies Prey On Home Owners Who Fall Behind On Their Mortgage
By Robert Massi
With
mortgage rates rising, home prices falling and consumers hampered by
more credit card, auto and bank debt than ever, there has never been a
more fertile time for scams that target homeowners.
A
July 3 New York Times article put a face on the victims of the latest
practice of “equity stripping.” In this home loan scam, homeowners who
have fallen behind in their mortgage payments sign over the deed to
their property – often unknowingly – in exchange for promises of
immediate cash and the chance to retain their home.
Once
these unscrupulous lending companies have the deed to the property,
they borrow against the equity in the home, pocket the cash and
patiently wait for the inevitable: the homeowner again falling behind
in payments.
As
holders of the property deed, these predatory lenders are then able to
foreclose. Armed with misleading advertising – and with an increasing
number of homeowners seeking a quick fix for financial woes – these
companies are successfully exploiting some of the most vulnerable
members of our society.
The
relentless pursuit of the American Dream – big house, multiple cars, a
wallet full of credit cards stretched to the limit – has left millions
of Americans poised on the brink of a financial disaster. It takes just
one moment of misfortune: an illness, an elderly parent that needs
financial assistance or the loss of a job to put these homeowners at
risk of losing everything they have worked so hard to acquire.
Over
the past 10 years, the housing boom has been a housing boon to those
middle and lower-class strivers who have managed to scrape together
down payments and qualify for mortgages. But while the housing market
is slowing, credit debt and consumer spending are increasing.
Many
people have a frightening a lack of knowledge about the terms of their
mortgage loans. They don’t take the time to understand alphabet soup of
available financing options: ARMs, GPMs, APRs – not to mention
“balloons,” “buy downs,” and “jumbos.”
As
a result, when debt overtakes earning and dark terms like “foreclosure”
become part of the vocabulary, most homeowners panic and seek what they
believe to be the quickest, easiest solution to their cash flow
troubles.
It’s
hard for frantic homeowners not to be tempted by the slick marketing
campaigns and smooth operators that offer them the promise of an easy
way to save their home and repay their debt. It’s equally difficult to
access the information that will help them to, at best, keep their
home, or at least allow them to tread water financially while waiting
for their situation to improve.
And
while these scams are finally coming under the scrutiny they deserve,
they are the inevitable outgrowth of fraudulent practices between
appraisers and mortgage companies over the past 10 years. Inflated
appraisals and unorthodox lending structures have added momentum to the
downward spiral of the real estate market, creating an avalanche of
foreclosures for first-time buyers, over-extended families, folks on a
fixed income, and other vulnerable homeowners.
As
an attorney who practices in Nevada, the leading state in the nation
for foreclosures (as reported in “In Business Las Vegas”), I’ve had too many people arrive in my office only after it’s too late for me to be of help.
I
get angry when I have to tell a retiree that I can’t stop the
foreclosure on their condo because the loan company they deeded their
home to has stripped the equity from the property and is waiting
patiently for the homeowner to default on payments once they have drawn
down their loan amount.
Or
when I have to tell the single mother that has refinanced her home four
times over the past two years – despite her poor credit history – that
there’s no way to stop the foreclosure process unless she can continue
to make the high monthly payments she was basically conned into
thinking she could afford.
It’s
this sense of outrage over the accessibility of basic facts necessary
to make informed judgments that affirms why we must continue to strive
to educate citizens about basic legal rights and terms. So, I’m taking
this opportunity to share what I know to be true about preserving your
equity and your home: |
1.
Understand the terms of your home mortgage loan. Invest the money up
front for a lawyer to review and explain it to you, or use a reliable,
competent real estate agent.
2.
Stick with established mortgage companies with long histories of
providing loans. Be suspicious of companies that are not licensed or
offer too-good-to-be-true financing. Your local Better Business Bureau
can help you research mortgage companies in your area.
3.
Learn about mortgage scams to protect yourself; the Federal Trade
Commission spells out these practices in simple terms on their website:
www.ftc.gov or call them at 877-FTC-HELP
4.
If you are confronted with a foreclosure situation, consult a lawyer
when you first receive a notice of default. Don’t ignore the facts. If
you expect your financial situation to resolve in the short term, you
may be able to work out an agreement with your mortgage company.
You
may want to explore bankruptcy arrangements. You may choose to sell
your home yourself, retain your equity and re-enter the housing market
when you are financially stable once more.
I
believe that educating the public is the best defense against fraud in
any arena. To a desperate homeowner in this current volatile housing
market, a deal that promises to get them out of debt and restore
ownership in their homes may sound too good be true. And, like all
successful frauds, the truth is: It is.
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