ANCHOR: REFINANCING CAN BE A GOOD THING, BUT IF YOU’RE NOT CAREFUL, YOU COULD LOSE YOUR HOME.

ANCHOR: WGN’S MONEY SAVING EXPERT ILYCE GLINK IS HERE WITH A LOOK AT COMMON LENDER SCAMS AND HOW TO AVOID GETTING CAUGHT.

GOOD MORNING.

ILYCE: PREDATORY LENDING IS A HOT TOPIC THESE, AND UNFORTUNATELY ILLINOIS IS ONE OF THE HOT SPOTS IN TERMS OF THE NUMBER OF CONSUMERS GETTING SCAMMED.

PREDATORY LENDERS TARGET:

ELDERLY
LOW-INCOME HOMEOWNERS
CREDIT PROBLEMS

ILYCE: UNSCRUPULOUS LENDERS ARE TARGETING HOMEOWNERS WHO ARE ELDERLY, HAVE LOW INCOMES OR CREDIT PROBLEMS, AND THEN TRY TO TAKE ADVANTAGE OF THEM.

ILYCE: IF YOU FALL INTO ONE OF THOSE GROUPS, OR IF ENGLISH IS YOUR SECOND OR THIRD LANGUAGE, WATCH OUT. THE FEDERAL TRADE COMMISSION HAS PUT OUT A WARNING ON FIVE KINDS OF HOME EQUITY SCAMS.

HOME EQUITY SCAMS

  1. EQUITY STRIPPING

LOAN BASED ON EQUITY
NOT ON ABILITY TO PAY MONTHLY FEES
IF YOU CAN’T PAY, THE LENDER TAKES YOUR HOME

ILYCE: WITH EQUITY STRIPPING, THE LENDER QUALIFIES YOU BASED ON HOW MUCH EQUITY YOU HAVE IN YOUR HOUSE – NOT ON YOUR ABILITY TO MAKE YOUR MONTHLY PAYMENTS. INEVITABLY, YOU’LL FALL BEHIND IN YOUR PAYMENTS AND THE LENDER WILL ZOOM IN AND TAKE YOUR HOME – AND ALL OF THE EQUITY.

  1. LOAN FLIPPING

REFINANCE EVERY THREE TO SIX MONTHS
TAKE OUT MORE MONEY
MORE FEES AND POINTS

ILYCE: WITH LOAN FLIPPING, THE LENDER HAS YOU REFINANCE EVERY THREE TO SIX MONTHS, TAKING OUT MORE MONEY AND PAYING MORE FEES AND POINTS EACH TIME. YOU END UP WITH A LOAN YOU CAN’T AFFORD BUT THE LENDER’S MADE A FORTUNE OFF OF YOU.

  1. CREDIT INSURANCE

CREDIT INSURANCE PAYS OFF MORTGAGE IF YOU DEFAULT
EXPENSIVE, UNNECESSARY
LENDER TELLS YOU IT’S A “MUST”

ILYCE: CREDIT INSURANCE PAYS OFF YOUR MORTGAGE IF YOU DEFAULT. SOUNDS GOOD, BUT IT’S VERY EXPENSIVE AND COMPLETELY UNNECESSARY. THE PROBLEM IS THAT THE LENDER TELLS YOU IF YOU DON’T BUY IT, YOU WON’T GET APPROVED FOR YOUR MORTGAGE.

ILYCE: IT’S COMPLETELY ILLEGAL TO PACK CREDIT INSURANCE INTO A MORTGAGE AND LATE LAST WEEK, HOUSEHOLD FINANCE AGREED TO A $500 MILLION SETTLEMENT TO SETTLE A LAWSUIT ABOUT PACKING CREDIT INSURANCE ONTO MORTGAGES.

  1. BAIT AND SWITCH

LENDER OFFERS YOU ONE THING
LOAN DOCUMENTS SAY SOMETHING ELSE
PRESSURE YOU TO SIGN AT CLOSING

ILYCE: WITH THE CLASSIC BAIT AND SWITCH, THE LENDER OFFERS YOU ONE THING OVER THE PHONE OR IN PERSON, BUT WHEN YOU GET TO THE CLOSING, THE LOAN DOCS SAY SOMETHING ELSE AND THE LENDER PRESSURES YOU INTO SIGNING. FINALLY

  1. DECEPTIVE LOAN SERVICING
    INACCURATE STATEMENTS
    CAN’T TELL HOW MUCH YOU OWE
    PAY MORE THAN YOU OWE

ILYCE: WITH DECEPTIVE LOAN SERVICING, THE LENDER PROVIDES YOU WITH INACCURATE OR INCOMPLETE STATEMENTS. YOU CAN’T TELL HOW MUCH YOU OWE AND COULD END UP PAYING FAR MORE THAN YOU DO OWE.

ILYCE: SO HOW CAN YOU PROTECT YOURSELF AND YOUR HOME EQUITY?

PROTECT YOURSELF – DON’T SIGN

  1. IF YOU CAN’T AFFORD NEW PAYMENT
  2. IF TERMS ARE DIFFERENT
  3. IF LENDER PRESSURES YOU TO ACCEPT CREDIT INSURANCE
  4. IF YOU DON’T UNDERSTAND THE DOCUMENTS

ILYCE: DON’T SIGN THE LOAN DOCS IF YOU CAN’T AFFORD THE NEW MONTHLY PAYMENT AT YOUR CURRENT INCOME, OR IF THE TERMS ARE DIFFERENT THAN WHAT YOU AGREED TO. ALSO, DON’T SIGN IF THE LENDER PRESSURES YOU TO ACCEPT CREDIT INSURANCE OR IF YOU CAN’T READ OR DON’T UNDERSTAND THE DOCUMENTS.

FOR MORE INFORMATION/COMPLAINTS

ILLINOIS OFFICE BANKS AND REAL ESTATE
310 S. MICHIGAN
(312) 793-3000

FEDERAL TRADE COMMISSION WWW.FTC.GOV

ILYCE: FOR MORE INFORMATION OR TO FILE A COMPLAINT AGAINST A LENDER, GO TO THE ILLINOIS OFFICE OF BANKS AND REAL ESTATE, 310 SOUTH MICHIGAN (312) 793-3000 OR CONTACT THE FEDERAL TRADE COMMISSION AT WWW.FTC.GOV.