Home Equity Scams
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 problemsand 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 cant 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
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
doesnt 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.
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.
You also may have additional rights under
state law that would allow you to bring a law suit.
The FTC suggests if youre 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 youve
already built up. Some additional tips to remember:
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.
Credit insurance may not be a good deal
from a lender. If you want the added security of credit insurance, shop around.
Dont sign a loan agreement if the
terms are not what you were given when you applied.
Ask for an explanation of any dollar
amount, term, or condition that you dont 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.
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.
The FTC works for the consumer to
prevent fraudulent, deceptive and unfair business practices in the
marketplace and to provide information to help consumers spot, stop and
avoid them. To file a
complaint or to get free information
on consumer issues, visit
call toll-free, 1-877-FTC-HELP (1-877-382-4357); TTY: 1-866-653-4261. The
FTC enters Internet, telemarketing, identity theft and other fraud-related
Consumer Sentinel, a
secure, online database available to hundreds of civil and criminal law
enforcement agencies in the U.S. and abroad.
FEDERAL TRADE COMMISSION
FOR THE CONSUMER