Snydley Whiplash At Your Service!

How to Spot and Avoid Equity Scams

With all the talk these days about Recession and layoffs and inflation, people are looking for ways to make ends meet. Regretfully January is the month when all those Holiday bills come due. Where do people get the money? Well those in dire straits that happen to be homeowners, there is always the old “Home Equity Loan”. Also known as “Second Mortgages” (but Home Equity sounds better than a second mortgage, regretfully there are to many people who think that if you soften the language, the experience is lessened, ask all those who have been “downsized” instead of “laid off” and see if there is any difference).

In fact about 25% of the TV commercials these days are for some sort of Home-Equity Loan (the rest are for beer, cars and a small percentage designated for other stuff). Funny as the banks themselves seem to have overextended themselves on other mortgage loans and now are desperate to trap a whole new set of victims..er customers.

Most lenders on the equity loan marketplace are legitimate lenders; however, a few lenders are taking the less fortunate for a ride. These unscrupulous lenders offer appealing loans, yet fail to tell the borrower about hidden charges or “balloon” charges. In fact this is what the whole “Mortgage Crisis” is about. Hidden charges are often stripped from loans, since the APR is a supposed security to borrower that weeds out hidden fees.

“Equity Stripping” is one of the leading scams on the loan marketplace. The lenders engaging in “equity stripping” will often present to borrowers (too good to be real) deals, leading them to believe that they are saving money. Thus, once the borrower agrees to the contract, the lender will pose new charges, high interest, and other fees that puts weight on the borrower, until he or she breaks and
fails to make payments on the mortgage. The lender then repossesses the home, selling the house for profit while the borrower is standing on the corner, wondering where he will live next.

Thus, the Federal Government has provided information to help borrowers avoid losing. Since equity stripping is becoming a huge industry, the Fed’s advise homeowners to watch out for equity stripping, including paying attention to lenders that are offering loans that reach above your wages.

The feds also advise borrowers to stay alert to “loan flipping,” which is the process of switching loans regularly and requesting larger amounts of cash on each refinance applied. If a lender is pressuring you to sign an agreement, you will need to find another lender, since pressuring borrowers is a surefire tip that the lender is out to take you for a ride. You will also want to consider PMI, which is personal mortgage insurance, which is a requirement; however, few lenders attempt to charge for additional coverage that is not needed. Thus, homeowners, especially the less fortunate,should adhere to advice and read details of any loan offered thoroughly.

It is amazing that these types of scams still exist. I don't know if I should laugh at or show pity for the fools who fall for these in this day and age of unlimited information. I know I feel deep scorn for the criminals who try to pull these scams and they should be in jail and out of business.

Mahalo.


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