Avoiding Home Equity Loan Scams
Predatory lending has become a serious problem. Many states now have laws in place to protect borrowers. If you plan on getting a home equity loan, you will want to do your homework and be wise to some of the home equity loan scams that are turning many borrowers into victims.
Loan Flipping
This home equity loan scam has been around for ages. Loan flipping occurs when the same loan is refinanced repeatedly. Each successive loan has a higher fee than the last, and the borrower ends up chucking out thousands of dollars, increasing their debt with each loan flip. Beware of any lender who encourages you to refinance your loan repeatedly.
Deed Stealing
Predatory home equity loan lenders may contact you and offer to help you with home equity financing. There is only one catch—you must sign over the deed to your property. The lender may claim that it is only a temporary measure, but chances are it isn’t. Once the lender has the deed to your property, you lose all rights and become a “tenant”. If you miss a mortgage payment, the lender has every right to evict you from your own home.
Equity Stripping
Equity stripping is another common home equity loan scam. It starts when the lender encourages you to get a home equity loan, knowing that you cannot afford to make the required home equity loan payments. In some cases, you may be asked to lie about your income on the home equity loan application. The lender knows it is only a matter of time before you default on your loan. This is when they swoop in, foreclose on your home, and strip you of the equity you have built up over the years.