Although many lenders have the best intentions to assist homebuyers, every year thousands of misinformed buyers — often seniors, minorities and low-income groups — fall prey to predatory lending, HUD recently said. A new brochure from the housing agency reportedly guides borrowers from falling into the pit.
The U.S. Department of Housing and Urban Development (HUD) announced its brochure, Don’t Be a Victim of Loan Fraud — Protect Yourself from Predatory Lenders, is a “must read for current homeowners who are considering refinancing, or first-time homebuyers before they sign the dotted lines.” HUD, which says it is committed to protecting homebuyers from unscrupulous predatory lending practices, advises consumers to do their homework and be cautious
According to the FBIs web site, “loan frauds account for the largest dollar volume — almost 40 percent — of all financial institution losses.” These mostly involve “unscrupulous professionals acting in collusion: mortgage brokers, accountants, appraisers, Realtors and bank loan officers, all of whom profit from bogus loan approvals through commissions, fees and fictitious sales.”
Correspondingly, before obtaining a home loan, HUD advises consumers to attend a homeownership course, compare loan prices with several lenders, as well as interview lenders and check their references.
These steps might have saved victims in Colorado up to $2 million in mortgage fraud from allegedly committed by a broker who had been previously incarcerated on various counts of securities fraud. MortgageDaily.com reported in May that some victims had disregarded the broker’s criminal past, but most were not aware of it.
HUD said consumers can avoid overpriced loans by getting price information of neighboring homes and hiring a home inspector to inspect the prospective property. Homebuyers should avoid being persuaded to borrow more than they know they can afford, as falling behind on payments increases the risks of losing a home and the money invested in it. And, borrowers should be suspect of anyone who steers them to just one lender that can provide them with “good deals.”
All information submitted on a mortgage application must be accurate, since lying indicates fraud and can result in criminal penalties, HUD said. Homebuyers should not allow lenders to talk them into making or signing false statements, such as overstating income, source of downpayment, nature and amount of debts or the length of employment. Consumers should also be honest in their intention to occupy the house by stating, for example, whether they’ll live in or rent the property after purchasing it.
The brochure advises borrowers to read contracts carefully, ask questions on unclear matters, and have documents reviewed by a lawyer specialized in real estate or by lower cost avenues such as HUD-approved agencies. Consumers should never sign anything they don’t understand, or a document that is blank or contains blanks, as these can be later filled to a borrower’s disadvantage by unscrupulous lenders, said HUD.
HUD’s advice could have possibly prevented a woman in Dayton, Ohio, from obtaining a fraudulent loan for a house she did not want. Last October, MortgageDaily.com reported the woman apparently trusted her loan originators and signed the home loan, despite seeing a different property address on the contract, a closing price $17,000 higher than was agreed upon and $10,000 cited as “cash from borrower,” which she had not provided. In addition, the woman never received $5,000 that were allegedly promised to her if she purchased the loan, and in turn she was questioned about fraudulent checks allegedly filled out by the originators to approve the loan.
