TALLAHASSEE - Attorney General Bill McCollum has issued a consumer
advisory warning Floridians of common mortgage fraud scams. Mortgage scams
were among the top ten categories of complaints received by the Attorney
General's Office last year. As National Consumer Protection Week draws to a
close, McCollum again encouraged residents of the state to be aware of
scams and fraud aimed at Florida homeowners.
There are several variations of home equity scams of which Floridians
should be aware. 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 the application is signed. 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 take into consideration
high interest rates and additional costs which could place undue financial
burdens on them, Attorney General McCollum cautioned. He encouraged
Floridians to shop around before choosing a lender and reminded them not to
sign a loan agreement if the terms are not the same as those they were
given 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, General McCollum urged prospective homebuyers to research brokers'
credentials to ensure they are properly licensed and certified before
entering into a contract.
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. The law establishes
requirements for certain loans with high rates or high fees. Additionally,
the act prevents balloon payments, which are large lump-sum payments
scheduled at the end of a series of considerably smaller periodic payments
and negative amortization which arises when the mortgage payment is smaller
than the interest due and causes 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 Attorney General's Fraud Hotline at 1-866-9-NO-SCAM
(1-866-966-7226). Complaints can also be filed at
http://myfloridalegal.com.
