Home mortgage: Second mortgage loan scams

Predatory lenders try to scam people into opting for loan with, out of the way terms and conditions. These are usually seen when there is a boom in the reality sector. Normalcy returns at the end of boom. Second mortgages should be taken only after due consideration and validation of the terms and conditions of new loan. Caution should is the watch word. There are many tactics that are tried by lenders to rope in borrowers.

Loan flipping – After completion of second mortgage a predatory lender would keep on pestering you to refinance your loan time and again whenever the rates of interest decrease. Borrowers usually do not realize that high fees have to be paid each time for refinancing. The best way to avoid this to calculate the savings before embarking to refinance. Try to be inert to pressure exerted by lenders to refinance your mortgage.

Abusive loan servicing – it has been often observed that after the closing of the deal, borrower receives letters and bills from lender that have to be paid as additional expenses and fees. They even go to the extent of charging late fee in spite of timely monthly payments. It is a good habit to keep all correspondence and receipts of payments as records for future reference.

Insurance packing – Lenders usually try to combine an additional credit insurance along with the second mortgage. It is better to go for it separately.

Altering loan documents after – This is a criminal offence but is a very common practice. Lenders change loan documents after the closing of deal. It is advisable to sign documents only after completely reading and understanding it. Vacant spaces should be cut across with a line and initialed. Maintain a record of copies of all loan documents.

Deceptive home improvement plan – Lenders and contractors act hand in glove and the same contractor might offer to finance the work too. It would involve high interests and bad terms. Beware and confirm credentials before going for such a package. Once you sign, contractor can leave work half done or do a bad job.

Demanding your deed – Scamming lenders would demand that borrower sign over deed to them in exchange of foreclosures. In return they would give a new loan on the basis of deed. In reality the deed entitles the lender to sell the house or borrow money against it. They might even evict the borrower. Hence information about defaults should be cross verified with the lender and refinancing abilities discussed.

Equity stripping – The equity that has been built up on property would be wiped clean with this scam. Initially, the lender makes the borrower lie about his income while taking out a second mortgage, thus borrower gets a larger loan. Once the borrower starts to default, the lender begins foreclosure. There is help available for people who have fallen prey to these scams. A lawyer can be contacted and advice can be sought. A compliant can be filed with Consumer Protection Bureau, FTC.