Florida attorney general warns consumers about mortgage fraud scams
 

TALLAHASSEE, Fla. – Feb. 12, 2007 – Attorney General Bill McCollum issued a consumer advisory, warning Floridians of common mortgage fraud scams. Mortgage scams ranked among the top 10 categories of complaints received by the Attorney General’s office last year.

Home equity scams come in several variations. Equity stripping occurs when a lender encourages a consumer to manipulate their loan application in order to qualify for a greater loan amount. Loan flipping involves lenders who repeatedly encourage consumers to refinance their loans, which may require them to borrow more money and, as a result, accumulate higher fees. Other scams include baiting and switching, where the lender offers one set of terms prior to the loan application and then pressures consumers to agree to a different set of terms after signing the application. Deceptive loan servicing, another common complaint, happens when lenders do not provide their clients with accurate or complete account statements and payoff figures.

Consumers shopping for a mortgage loan should consider high interest rates and additional costs that could place financial burdens on them, McCollum cautions. He encouraged Floridians to shop around before choosing a lender and don’t sign a loan agreement if the terms are different than the ones presented when they applied. Consumers should also ask for explanations of any dollar amount, term or condition they don’t fully understand. If using a broker, McCollum urged prospective homebuyers to research brokers’ credentials to make sure they’re properly licensed and certified.

The Attorney General’s office provided the following tips to consider when applying for home equity loans:

• Ask specifically if credit insurance is required as a condition of the loan
• Keep careful records of any amount paid
• Check contractors’ references for any construction and get more than one estimate
• Read all items on the contract or application carefully
• Never sign an application or contract with blank spaces
• Lenders should never pressure applicants 

The Home Ownership and Protection Act of 1994 addresses certain unfair and deceptive practices in home equity lending, establishing requirements for certain loans with high rates or fees. Additionally, the act prevents balloon payments, which are large lump-sum payments scheduled at the end of a series of smaller periodic payments and negative amortization, causing the loan balance to increase rather than decrease. The law also prevents default rates that are higher than pre-default rates and most prepayment penalties.

Consumers who believe they many have complaints about a mortgage scam may call the Florida Attorney General’s Fraud Hotline at 1-866-9-NO-SCAM (1-866-966-7226). Complaints can also be filed at http://myfloridalegal.com.

 

© 2007 FLORIDA ASSOCIATION OF REALTORS®

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