Many couples work hard and long, building equity in their home to use someday for retirement or that long waited for vacation. Sadly, many couples are ripped of through a variety of loan frauds, stripping them of everything they worked to achieve. If you are already a homeowner or starting to think about buying a home, you should consider ways to protect your investment.
One of the best organizations serving people nationwide in fighting home loan fraud is the Consumer Action, founded in 1971. This nonprofit organization does an excellent job in providing guidance for consumers through a number of channels. They direct consumers with complaints to the appropriate agency, they advise consumers of their legal rights, and publish educational information in a number of languages to include English, Korean, Spanish, Chinese, Vietnamese, among others.
One of the biggest frauds being carried out is that a contractor will show up at your door, offering to do high dollar maintenance or improvement on your home. All you have to do is take out a home equity loan and in return, you will have an even greater home, which will build your equity even higher. If you are ever approached about taking out a second mortgage you need to run – fast!
Most home equity fraud occurs when the terms of a loan are grossly misrepresented. This type of fraud started back in the 1980s and even though the Federal government has implemented several disclosure rules, it continues to be a problem. The problem for the homeowner is that these people committing the fraud are incredibly good. They have an amazing skill at talking homeowners into excessive loans with payments and interest so high the homeowner soon forecloses, losing everything.
Another way these frauds work is they will do everything in their power to get you to sign blank documentation. They will promise you the moon, swaying you with charm and phony expertise. After you sign, they fill in the blanks to suit them. Obviously, the number they put into the blanks is nothing close to what you verbally agreed to. For instance, today’s interest rate for mortgages is anywhere from 5% to 8%. With this type of fraud, you will get the paperwork back and see they filed in the interest rate at 30% or more! Another way the equity loan fraud will get you is they will fill in the appropriate interest rate, making the monthly payment seems okay. However, if you were to look closely at the contract, you would see a huge payment due at the end of the loan that is ridiculously high.
Although anyone can be targeted for this type of fraud, typically the people sought out are individuals with financial troubles and the elderly. They seek the people with financial trouble because they are usually desperate and see this as a quick way out of debt, without realizing they are only getting themselves in deeper. For the elderly, the home is often free and clear of title, which mean there is much more equity to steal. Beware!