The present housing market seems to be focusing more on predatory lenders and deceptive home financing. Many news related to such issues have emerged.
Just recently, United States Senator Dean Heller wrote a letter addressed to Veterans Affairs Secretary David Shulkin expressing his deep concern about predatory lending practices targeting military veterans.
In the letter, the Senator Heller mentioned that veteran homeowners are bombarded with numerous phone calls and mails encouraging them to refinance their homes. Some lenders do this just to make money without making sure that the borrowers understand the pros and cons of refinancing their mortgages. Furthermore, the senator said that refinancing multiple times a year can be detrimental to the veteran’s home loan in the long-term.
In other news, Washington State Department of Financial Institutions (DFI) Consumer Services Division has charged a California-based lending company for the use of ‘misleading and false advertising’. The said reverse mortgage ads targeted senior homeowners ages 62 and up.
According to a report from the National Mortgage Professional Magazine, the department alleged that the said company used ‘deceptive solicitations, brochures, internet websites, Youtube videos and Facebook pages’ to promote HECM. Home Equity Conversion Mortgage (HECM) is the Federal Housing Administration’s (FHA) reverse mortgage program.
The DFI also claims that the advertising materials ‘intentionally misrepresented’ the terms of the HECM program and that the risks of default and foreclosure weren’t disclosed. The department is pursuing a final order to cease and desist, a fine of $300,00 and an investigative fee.
The government, both at the national and local level, is doing its best to protect consumers from deceptive home financing schemes. Laws and regulations have been set to fence out these unethical lenders. It is evident in the recent news that the government is in an active pursuit.
As consumers, it is also our responsibility to keep watch. If we are able to identify deceptive home financing it is easier to shun them. By doing so, we are not only helping ourselves, we are also helping the industry as a whole by eliminating the buying-end.
Here are some effective ways to detect and protect yourself from predatory lending practices. Remember these red flags when dealing with lenders.
Hard Selling the Benefits of a Program
In the attempt to make a quick profit, some lenders only highlight the good and dim out the bad. Lenders who do this are just doing business for the money. They aren’t putting the consumer’s best interest ahead.
Solution: Never be scared to ask the lender about the disadvantages of a particular program. Know what possible consequences there are when taking the loan. If they won’t oblige or say that there isn’t, ask another lender.
Taking a good look at the two sides of the coin will help you understand the mortgage program better.
Pressuring You to Act Quickly
Home financing requires ample time for research and planning. If a lender is putting you in a lot of pressure to grab an offer, don’t take the bait. If you say yes right away without studying your situation, you may be caught off guard with hidden fees and charges or unfavorable terms which can be detrimental to your finances.
To deal with this, always allow yourself some time to pause, step back and examine the entire picture. Ask yourself important questions like, “Given my present financial situation, can I afford a home?”, “Do I really need to refinance my mortgage?” and “Is this truly the right program for me?”
Feeding You with Countless Marketing Materials
Inherently, this isn’t a bad thing. Lenders have to put their products out there so that people will know that such products exist. Advertising materials are good ways for you to explore your options.
However, it can be disastrous when a lender overwhelms you with multitudes of mails and phone calls, let alone you relying on just these sources.
Avoid being deceived by biased advertising by cross-checking such information to determine its validity and accuracy. Reference to multiple sources, examine various angles and talk to different lenders. Make sure you have all the right information before you take home financing program.
Remembering these three warning signs will make it easier for you to detect unscrupulous lenders. With a little probing, research, and patience, you will be able to identify which lenders are truly honest and who aren’t. Make sure you protect yourself from opportunistic people who are there only for your money.
The government is doing the best it can to protect you. You must also do your part. Speak and do business only with reputable lenders. A good lender puts your best interest forward. They understand that homeownership is serious business. They are they because they know that you need them and they want to help. Start shopping to make sure you find yourself the right lender.