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Staff members in my neighborhood offices are often asked about how to avoid predatory lending schemes and how to proceed if someone has been victimized by one. Predatory lending victimizes people who have trouble getting loans because of poor credit ratings, lackluster employment histories, or their homes are in foreclosure. Predatory lenders may refinance small mortgages with terms that harm the borrower (also known as “loan flipping”), factor overpriced insurance or balloon payments into loans, or set high penalties for paying off loans early. People whose homes are in default or foreclosure often fall victim to the foreclosure rescue scam. In such cases, a disreputable lender pressures a homeowner to make a refinancing deal to “save” his or her home. However, once the deal is done, the lender ends up owning the home, and the original owner becomes the “savior’s” tenant. The victim can be evicted if the lender sells the home to a third party. In 2007, New York’s “Home Equity Theft Prevention Act” went into effect to help victims of mortgage rescue scams. Among other things, it allows a victim to rescind a sale within two years if the law was broken and the scammer still holds the title. The law also establishes civil and criminal penalties for mortgage rescue scams. To learn more, visit the State Banking Department’s website at www.banking.state.ny.us/hetpyrul.pdf. Because predatory lending is such a pervasive problem, assistant district attorneys from my office often present seminars on the subject at community centers across Brooklyn. The best way to avoid predatory lending is through education. Below are some tips to keep in mind when applying for a loan: •Bring your own lawyer to handle the transactions and paperwork. Do not use the lender’s lawyer. If you do not have an attorney, contact the Brooklyn Bar Association at (718) 642-0843. •Read everything very carefully. Do not agree to a deal verbally. Get everything in writing. Do not agree to falsify any information. •Do not sign a blank document or leave a document containing blank spaces to be filled in later. Check your loan file. •Do not leave any of the following disclosures missing: Good Faith Estimate, Special Information Booklet, Truth in Lending, and HUD-1 Settlement Statement. •Get a breakdown of your monthly payment. Do not allow others to convince you that you can afford something that you know is beyond your budget. •Make sure that the loan you obtain is not more valuable than your home. For more information, visit www.brooklynda.org or call (718) 250-2340.
For additional information visit www.brooklynda.org. To have your questions answered in a future column, send them to asktheda@brooklynda.org. |
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