| Second mortgage home loan scams are especially | | | | home equity loan with poor terms, but the contractor |
| prevalent during housing booms when equity is growing | | | | threatens to stop the work if you don't sign. Once you |
| at a record pace and homeowners regularly refinance | | | | sign, the contractor fails to complete the project or the |
| or take out home equity loans or home equity lines of | | | | work is shoddy. Tip: Before deciding to do home |
| credit. Although most reputable lenders return to | | | | repairs, interview several contractors, review |
| reasonable loans when a housing boom ends, | | | | estimates and references, and arrange the financing |
| predatory lenders are still out there. If you're looking for | | | | yourself. |
| a second mortgage, watch out for these scams. | | | | Demanding Your Deed |
| Popular Second Mortgage Home Loan Scams | | | | Default filings are public records. If you receive calls |
| Scammers create new tricks every day, but these | | | | from lenders following a notice of default, be very |
| are the most common tactics you'll encounter and tips | | | | cautious. Scammers will offer to save you from |
| to avoid them. | | | | foreclosure with a new loan, but demand you sign the |
| Loan Flipping | | | | deed over to them before the financing is arranged. |
| Once your second mortgage loan is complete, a | | | | The "lender" can evict you, sell your house, or borrow |
| disreputable lender will encourage you to repeatedly | | | | against it, leaving you without a home. Tip: If you |
| refinance your loan each time a lower rate is available. | | | | receive a notice of default, contact your lender about |
| Each refinancing comes with hefty fees that erase | | | | refinancing or contact alternative lenders after careful |
| your potential savings. Tip: Always determine the | | | | research. |
| potential costs and savings before refinancing. Don't let | | | | Equity Stripping |
| a lender pressure you into refinancing in order to get a | | | | If you've experienced financial difficulties, but have built |
| great deal that will vanish tomorrow. | | | | up substantial equity, the predatory lender encourages |
| Abusive Loan Servicing | | | | you to lie about your income on the second mortgage |
| Some predatory lenders don't strike until the loan is | | | | application in order to qualify for a larger loan than you |
| closed. Once the loan is complete, you receive letters | | | | can afford to pay. Once you default, the lender |
| from the lender claiming you owe additional taxes or | | | | forecloses, leaving you with nothing, but they can sell |
| fees that you paid directly. They may also charge late | | | | your house and earn a profit. Tip: Never borrow more |
| fees even though your payments are on time. Tip: If | | | | than you afford to repay and never lie on a loan |
| you're being asked to pay something you don't owe, | | | | application. |
| send the lender a letter with proof of payment. | | | | What to Do if You've Been A Victim of a Scam If |
| Insurance Packing | | | | you've fallen victim to one of these home loan scams, |
| Your lender encourages you to buy additional | | | | you can get help before you lose your home. |
| voluntary credit insurance and bundle it into your | | | | If your loan has additional insurance included in it, try to |
| second mortgage payments. Tip: Don't accept this | | | | cancel it. If interest rates are lower, it may be |
| insurance with the loan. If you're interested in it, buy it | | | | worthwhile to refinance to a new second mortgage |
| separately. | | | | without the insurance. |
| Altering Loan Documents After the Fact | | | | If your contractor fails to complete the work or |
| The FTC has charged several predatory lenders with | | | | completes it poorly, report him to your state's |
| fraudulently changing loan documents after the fact. | | | | contractor licensing agency. You may also be able to |
| Tip: Never sign documents you haven't read or sign | | | | sue him. Contact a reputable lender to refinance the |
| them under pressure. If there is a blank space, draw a | | | | high-interest loan. |
| line through it and initial it. Always get a copy of all loan | | | | For all other scams, first contact a lawyer to |
| documents you signed before leaving the office. | | | | determine your rights and recourse. Second, file a |
| Deceptive Home Improvement Loan | | | | complaint with Consumer Protection Bureau of the |
| A contractor may knock on your door and offer to do | | | | FTC. Although the FTC doesn't resolve individual |
| home repairs. To help you pay for it, he'll even arrange | | | | complaints, they can take action if a record of abuse |
| the financing. The financing is usually a high-interest | | | | can be proven. |