Don’t Lose Your Home




Don’t Lose Your Home
Predatory
Lending


 



How To Protect Yourself From
Predatory Lending


 



DO


  • Get free pre-loan counseling before
    you sign on the dotted line.

  • Shop around for the best home
    equity loan for your financial situation.

  • Read every word on any loan document
    before you sign.

  • Avoid loans with one large "balloon
    payment" at the end.

  • Protect your friends and neighbors
    by reporting home equity fraud immediately.


DON’T


  • Don’t fall for a loan from
    a door-to-door salesman or home improvement contractor who comes to your home.

  • Don’t decide whether you
    can afford a loan by the monthly payments alone.

  • Don’t sign anything that
    has blank spaces.

  • Don’t take out a loan on
    your property for anyone else unless you can afford to lose that money forever.


What Is Predatory Mortgage Lending?
 

Sometimes, taking out a
loan against your home’s equity can be a good idea. Home equity borrowing
should not be a problem as long as the loan is a fair one and you have the ability
to repay the loan.

Predatory mortgage fraud is
different:

Lenders seek you out and trick
you into taking out a loan against your home which you cannot afford to repay.
Most times, these loans have very high interest rates and steep fees. When
you fall behind on your payments, the lender can take your home and all your
equity through a legal process called foreclosure. The lender then owns your
home. Once the damage is done, it is very hard to undo. Most people never
get their homes back again.

 


Why Should I Care?

Nationally, home repair
and home equity fraud have stripped the value from the homes of an estimated
100,000 people in 29 states. In the entire country, the San Francisco Bay Area
is one of the areas hardest hit by home equity fraud.

Real people, many of them senior
citizens, have lost ownership of their homes and all their equity, with no
hope of ever getting any of it back.

Anyone with equity
in a home is a potential target. You could be next. Your home equity is
just like money. Protect it!

If you are a homeowner or know
someone who is, you should learn about predatory lending. Knowing what to
look for and how to protect yourself can keep you or a loved one from losing
a home.


Here’s How To Protect Yourself
From The Most Common Types Of Predatory Lending:

Don’t take out
a loan from an uninvited door-to-door contractor who appears at your home.

Instead: Many local government
agencies have special programs to make it easy to repair housing. See if you
qualify for one of these programs available in your area. See the Home Improvement
Resource List, a separate Consumers Union publication.

Find your own contractor; don’t
wait for one to come to you.

Shop for your own financing. You’ll
probably get a better deal.
 

Steer clear of door-to-door
salespersons who want to fix your home after a disaster such as an earthquake
or flood.
 

Instead: Call the Federal
Emergency Management Agency (FEMA) at 1(800)462-9029 for information about
repairing and financing repairs to your home after a disaster.
 

If you are in foreclosure because
you couldn’t pay your mortgage, someone you never heard of will offer
you a new loan. Watch out.
 

Instead: Think about selling
your home and keeping your equity rather than taking out another loan. See
a credit counselor to talk about all of your alternatives.
 

Don’t put your other debts
"on the house" through a bill consolidation plan.
When you consolidate
credit card debt or your car loan, for example, into a home equity loan, you
put your home on the line for that debt. Once you put that debt "on your
house," you can lose your home if you don’t make those payments.
 

Instead: Talk to a credit
counselor. You can get help to work with your creditors to make payments more
manageable, possibly without putting debt "on your house."


Look Out For These Danger Signs
 

"No Credit? No Job?
No Problem!"
"Don’t worry, you have plenty of equity in your home to qualify for
a loan."
 

Walk away from anyone who says
any of these things to you. You may be dealing with someone who will treat
you unfairly. They don’t care if you can pay the loan. They know they
can legally take your house through foreclosure if you don’t pay. In
their eyes, the one thing that "qualifies" you for a loan is your
inability to pay it.

 


Before you borrow against your home,
ask yourself these two questions:
 

Can I afford this loan?
Just because a lender says you "qualify" doesn’t mean you
are getting an affordable or fair loan. If you cannot afford the loan, you will
lose your home.
 

What will I do if I lose my
home?
Most people have nowhere to go after they lose their homes. Remember
that it is easier to learn how to protect your home now than it is to pick
up the pieces after it’s gone. Take advantage of free, local loan counseling.
See the Resources section at the end of this pamphlet.

 


Don’t Let Anyone Steal Your
Home!
 

Here’s How:
 

DO

Get the "big picture"
on a loan. Look at more than the monthly payments. Make sure that a loan’s
interest rate and fees are competitive and fair. Shop around with different
lenders to compare.
 

Hang-up on unsolicited telephone
callers. Toss-out mailers you receive from companies offering to arrange a
home loan for you.
 

Steer clear of high-pressure sales
tactics, such as claims that an offer is good only for a limited time.
 

Seek help from a trusted family
member or friend who understands financial matters and can help you get free
loan counseling.
 

Avoid loans that are set up as
"interest only, non-amortizing or partially amortizing loans." With
this type of loan, you still owe the money you borrowed after you make all
the payments. You must make one large, final payment, known as a balloon payment.
If you can’t make this payment, you may lose your home through foreclosure.
You should avoid these loans at all cost.
 

Beware of lenders or contractors
who try to trick you into signing away your home. Make sure that a "Contract
for Home Improvement Services" is only that. Don’t give your house
away by signing a "Deed of Trust" or a "Quitclaim Deed."
 

Think twice about taking out a
loan against your home to give money to anyone,even a friend or family member.
Consider such a request only if you can afford lose that money forever. Otherwise,
you may lose your house if the other person doesn’t repay you in time.
 

Act fast if you were pressured
into signing for a loan you didn’t really want or cannot afford. Federal
law gives you three days to get out of a loan contract whenever your home
is used as security for a home equity loan. You may cancel the loan for any
reason, but only if you do it in writing within 3 days. This is known as the
right of rescission. Contact an attorney immediately if you have any questions
about whether your lender violated the law.
 

DON’T

Don’t sign anything
related to a home loan without first obtaining independent, free advice from
a nonprofit counseling agency. Check the Resources list below.
 

Don’t take the first loan
offer that lands in your lap. Shop around! Some lenders charge more than others
do.
 

Don’t trust door-to-door loan
sellers. If you really need or want a home loan, you should make the first
contact and carefully investigate all the possibilities before considering
a loan.
 

Don’t take out a loan that
is made solely on the value of your home, not on your ability to repay it.
Your home equity alone does not give you the income you need to make the monthly
payments.
 

Don’t borrow more money than
you need. The bigger the loan, the more stake your lender will have in your
home equity.
 

Don’t sign a form with incorrect
information about yourself on it.
 

Don’t sign anything to do
with your home that contains blank spaces. Once your signature is on a form,
anyone can fill in those blank spaces with obligations that may be very different
than the ones you have agreed to.
 

Don’t sign any forms written
in a language you do not understand. You may be signing away your home without
even realizing it! It’s okay to say "I don’t understand and
I will not sign this."
 

Remember: if the offer
is good today, it should be good tomorrow
 

If it sounds too good to be
true,
it probably is.


 

Resources
 

Before you take out a home equity
loan, get pre-loan counseling for free:
 

San Francisco

Bar Association of San
Francisco
Equity Fraud Hotline and lawyer referral (415) 989-1616
 

Consumer Credit Counseling Service
(415) 788-0288 or (800) 777-7526

Consumer Action (415) 777-9635
 

Alameda County

ECHO Housing – Oakland
(510) 836-4826
ECHO Housing – Berkeley (510) 845-9030

 

Contra Costa County

ECHO Housing (925) 679-8023
 

San Mateo County

Consumer Credit Counseling
Service
(800) 200-6444

Legal Aid Society of San Mateo
(650) 558-0915

ECHO Housing – Palo AltoBerkeley
(650) 327-1718
(650) 853-1600
 

Santa Clara County

Consumer Credit Counseling
Service
(800) 969-7526
 

If you feel you are the victim
of home equity lending fraud, call one of the local agencies above. Then call
the National Fraud Information Center. File a written complaint against the
lender with the appropriate local law enforcement and state regulatory agencies.

 

National Fraud Information
Center

(800) 876-7060

Fraud reports from consumers are
sent within minutes to the appropriate law enforcement agency.
 

Law Enforcement:
 

San Francisco
Office of the District Attorney: (415) 553-1814
 

Alameda County
Office of the District Attorney: (510) 569-9281
 

Contra Costa County
Office of the District Attorney: (925) 646-4500
 

San Mateo County
Office of the District Attorney: (650) 363-4677
 

Santa Clara County
Office of the District Attorney,
Real Estate Fraud Division (408) 792-2880
 

State Regulatory Agencies:
 

Call each agency to see if the lender
you are complaining about is licensed by that agency. Sometimes lenders are
licensed by both agencies.

 

California Department of Real
Estate

185 Berry Street, Room 3400
San Francisco, CA 94107
(415) 904-5925
 

California Department of Corporations
3700 Wilshire Blvd., Suite 600
Los Angeles, CA 90010
(800) 347-6995 (toll free)