Loan Fraud FAQs from HUD

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FAQs about Loan Fraud from HUD!

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Loan Fraud FAQs from HUD

  1. 1. Don’t Be A Victim of Loan Fraud Protect Yourself from Predatory Lenders Buying or refinancing your home may be one of the most important and complex financial decisions you’ll ever make. Many lenders, appraisers and real estate professionals stand ready to help you get a nice home and a great loan. However, you need to understand the homebuying process to be a smart consumer. Every year, mis- informed homebuyers, often first-time purchasers or seniors, become victims of predatory lending or loan fraud. Don’t let this happen to you! 11 tips on being a smart consumer 7 Before you buy a home, attend a Do NOT let anyone convince you to borrow 1 homeownership education course offered more money than you know you can afford by a U.S. Department of Housing and Urban to repay. If you get behind on your Development (HUD)-approved, payments, you risk losing your house and all non-profit counseling agency. of the money you put into your property. Interview several real estate professionals Never sign a blank document or a document 8 2 (agents), and ask for and check references containing blanks. If information is inserted before you select one to help you buy or sell by someone else after you have signed, you a home. may still be bound to the terms of the contract. Insert “N/A” (i.e., not applicable) 3 Get information about the prices of other or cross through any blanks. homes in the neighborhood. Don’t be fooled 9 into paying too much. Read everything carefully and ask questions. Do not sign anything that you don’t 4 Hire a properly qualified and licensed home understand. Before signing, have your inspector to carefully inspect the property contract and loan agreement reviewed by an before you are obligated to buy. Determine attorney skilled in real estate law, consult whether you or the seller is going to be with a trusted real estate professional or ask responsible for paying for the repairs. If you for help from a housing counselor with a have to pay for the repairs, determine HUD-approved agency. If you cannot afford whether or not you can afford to make them. an attorney, take your documents to the 5 Shop for a lender and compare costs. Be HUD-approved agency near you to find out suspicious if anyone tries to steer you to just if they will review the documents or can one lender. refer you to an attorney who will help you for free or at low cost. Do NOT let anyone persuade you to make a 6 false statement on your loan application, 10 Be suspicious whenup if cost don’thome the the of a such as overstating your income, the source improvement goes you accept of your down payment, failing to disclose the contractor’s financing. nature and amount of your debts, or even Be honest about your intention to occupy 11 how long you have been employed. When the house. Stating that you plan to live you apply for a mortgage loan, every piece of there when, in fact, you are not (because information that you submit must be accurate and complete. Lying on a mortgage you intend to rent the house to someone application is fraud and may result in else or fix it up and resell it) violates federal criminal penalties. law and is a crime. -1-
  2. 2. What is Housing counselors with PREDATORY a HUD-approved agency LENDING? can help you be a smart In communities across America, people are losing their homes and consumer. To find a their investments because of counselor near you, call 1-800-569-4287 predatory lenders, appraisers, mortgage brokers and home or go to HUD’s web site www.hud.gov. improvement contractors who: Sell properties for much more than they are worth using false WHAT TACTICS appraisals. DO PREDATORS USE? Encourage borrowers to lie about their income, expenses, or cash A lender or investor tells you that they are your only available for down payments in chance of getting a loan or owning a home. You order to get a loan. should be able to take your time to shop around and Knowingly lend more money than compare prices and houses. a borrower can afford to repay. The house you are buying costs a lot more than Charge high interest rates to other homes in the neighborhood, but isn’t any borrowers based on their race or bigger or better. national origin and not on their You are asked to sign a sales contract or loan credit history. documents that are blank or contain information Charge fees for unnecessary or that is not true. nonexistent products and services. You are told that the Federal Housing Pressure borrowers to accept Administration insurance protects you against higher-risk loans such as balloon property defects or loan fraud — it loans, interest-only payments and does not. steep pre-payment penalties. The costs or loan terms at Target vulnerable borrowers for closing are not what you agreed cash-out refinance offers when to. they know borrowers are in need You are told that refinancing can of cash due to medical, solve your credit or money unemployment or debt problems. problems. “Strip” homeowners’ equity from You are told that you can only get a their homes by convincing them good deal on a home improvement if to refinance again and again you finance it with a particular lender. when there is no benefit to the borrower. REMEMBER Use high pressure sales tactics to If a deal to buy, repair or refinance a house sell home improvements and sounds too good to be true, it usually is! then finance them at high interest rates. -2- HUD-2003-01-H

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