September 16, 2016

How Can You Be Fooled?

Overpricing ("I can get you the best rate in town.")
Mortgage brokers may promise to get you the "best rate." While many brokers are honest and will work hard for you, you should always remember that the broker, in addition to anything you pay him, is usually paid by the lender too. Some brokers may be more interested in sending your loan to the lender who pays the most to the broker. It may not be the best priced loan for you. You should ALWAYS shop around.

Not getting what you bargained for ("Don't bother reading all this Legalese.")
A reputable lender encourages you to understand the loan, including the costs of the loan, and to read what you are signing. You should make sure that the documents you sign say what the lender or broker told you they would say.

Borrowing more than you need ("Think what you can do with the extra money.")
Don't get talked into borrowing more than you need. Think about the reasons you are borrowing, and try not to be enticed by the lure of "easy credit." You will be repaying the loan for a long time and the additional money will lead to higher costs for you.

Don't get talked into a refinancing (or "refi") of your current mortgage that you do not need. It may be less expensive overall to have a second mortgage loan with a higher interest rate than a new "refi" with a lower rate. You should compare all the loan terms, not just the monthly payment and interest rate. A "refi" may unnecessarily add to your total loan costs and increase the total amount you owe on your home loan.

Don't Get Flipped ("I can lower your monthly payment even more this time.")
One common way people can get hurt is by what is called "flipping." That is when you are encouraged to refinance your loan frequently. An unscrupulous lender or broker always has an explanation for why you should refinance, such as lowering your interest rate or getting more cash. What an unscrupulous lender or broker may not reveal is that they both make money every time you refinance, and the benefits to you may not be as real as you are led to believe. Here are some of the things that might be hidden from you:

  1. Even though the interest rate is lower, you may end up with higher monthly payments because of high front costs that increase your mortgage balance.
  2. The single premium insurance that you bought has come to the end of its term, but you are still paying for it as part of the loan amount.
  3. If the loan you had before was not secured by a lien on your home, this one will be. Now if you miss payments, you could lose your home.
  4. Monthly payments may be lower only because the term of the loan is much longer. This means that in addition to paying for a longer time, you will be paying much more money.
  5. You could get a lower interest rate and lower fees on the refinancing if you shopped around.

Don't Become a Victim of Mortgage Fraud! ("Trust me, you'll make a lot of money.")
Mortgage fraud is a crime. Among other things, it can consist of giving false information or documents in connection with a mortgage loan application, stealing a person's identity and using that identity to obtain a mortgage loan, misrepresenting the purpose of a mortgage loan, misusing mortgage loan proceeds, providing or relying on a property appraisal that is known to be overstated, and property flipping (repeatedly selling a property to participants in the fraud at prices higher than its real value to provide a basis for an overstated appraisal). As is evident from this list, anyone involved in the mortgage loan origination process can be a participant in mortgage fraud.

Here are some "do's and don'ts" offered by the Georgia Real Estate Fraud Prevention and Awareness Coalition to combat mortgage fraud:

DO:

  • DO provide your confidential financial and personal information only to someone you trust and know works for the Lender.
  • DO be honest when completing the loan application and answering questions during the application process.
  • DO request and keep copies of everything you provide to the Lender and everything you are required to sign. The Lender should not have any problem honoring your request for copies.
  • DO review the Good Faith Estimate of Closing Costs that is required to be given to you by your Lender. Ask about any parties being paid or fees you do not understand or with which you disagree. Ask for a written confirmation of the interest rate lock-in once you have agreed to lock in a rate.
  • DO read and understand all of the documents presented to you before you sign them. Ask questions about anything you do not understand. Realize that when you close the loan, you are personally responsible for repayment of the loan.
  • DO proceed with caution if you are encouraged to become a real estate investor of multiple properties in a short period of time, especially if you are not required to put money down – or, even worse, if you receive money back from the transaction.

DON'T:

  • DON'T create a false identity or use someone else's identity or social security number to obtain a loan.
  • DON'T provide, or pay anyone else to provide, false information about your employment, income, credit or bank accounts.
  • DON'T accept payment for use of your name, credit or social security number.
  • DON'T close a loan that you know has false or misleading information including appraisals with inflated values, down payment or earnest money that did not come from you, or rental leases that you believe to be inaccurate.
  • DON'T pay your earnest money (down payment) to anyone other than your real estate agent or the seller of the home you are purchasing. If you have doubts about who really owns the home you are purchasing, call the county tax assessor to verify the current owner and find out when they took ownership.
  • DON'T let anyone sign anything for you during the loan process without your written approval and authorization. Take time to consider the power you are giving this person when you authorize them to sign for you.
  • DON'T expect to get "paid" for purchasing a home. YOU should be bringing a certified check to closing in order to buy the home.
  • DON'T pay anyone additional fees or costs associated with the loan closing or application process after the loan closes. If someone asks you to do this, refuse and obtain legal advice.

For more information about mortgage fraud, including how you can report mortgage fraud, go to http://www.grefpac.org or http://www.stopmortgagefraud.com. Don't hesitate to contact your local law enforcement officials or your local FBI office.

Don't Become a Victim of a Foreclosure Rescue or Credit Repair Scheme! ("I can help you save your house from foreclosure.)
If you are having trouble making your mortgage payments or have received a letter from your mortgage lender asking you to contact them, DO NOT IGNORE THE PROBLEM. It will not go away; it will only get worse! Instead, you should:

  • Contact your lender immediately to discuss the problem.
  • Open and respond to all mail from your lender.
  • Read your loan documents to learn what your lender can do if you do not make your payments.
  • Contact your State Government Housing Office to learn about your state's foreclosure laws and processes.
  • Understand your foreclosure prevention options, including contacting your local legal services office.
  • Contact a HUD-approved housing counselor or someone from the Homeownership Preservation Foundation (HOPE).
  • Get your financial house in order – develop a budget, identify and eliminate optional expenses, find ways to increase your income, sell personal assets.
  • Avoid "for-profit" foreclosure protection companies that will charge you a fee – sometimes a substantial fee – for advice that you probably can get from other sources for free.
  • Avoid persons who offer to "rescue" you from foreclosure or who promise to "repair" your credit.
  • Be wary of companies that aren't your lender that offer, for a profit, to help modify your loan or adjust your debt. You can always talk with your lender about trying to modify your loan. You can also use the services of a non-profit credit counseling service. Just remember to research any company before you use them to help you with your finances.

For more information about preventing foreclosure or to contact a credit counselor, go to

  • HUD - www.hud.gov/foreclosure
  • HOPE - www.995HOPE.org
  • or call the Foreclosure Hotlines listed below:
        · TOLL FREE 1-800-569-4287 (HUD)
        · TTY 1-800-877-8339 (HUD)
        · 1-888-995-HOPE (HOPE)