Steer Clear of Predatory Lenders

One of the ways to stay on your road to housing recovery is to steer clear of bad deals. Bad deals such as predatory loans and home improvement scams can strip you of your hard-earned money. This section describes some of the bad deals that you should avoid.

Predatory lenders target consumers who are uninformed, have credit problems, or are desperate to get a loan. The loans they offer include very high fees and charges, and misleading terms and conditions. These lenders may use aggressive and/or deceitful practices, and may strip the homeowner's equity that has been built up over time. These practices may even lead a borrower into such levels of debt that they end up losing their home.

Caution: Predatory Loans Don't Take This Dead End Street

• Shop Around Don't trust door-todoor or phone salespeople offering you a bargain.
• Watch out for bad loan terms Avoid balloon payments, high interest rates, prepayment penalties, and credit life insurance.
• Ask questions Don't be afraid to ask questions if you don't understand something; you have a legal right to know the total cost of your loan, the annual percentage rate, the monthly payments, and how long you have to pay back the loan.
• Don't sign Don't sign a blank document or anything the lender promises to fill in later or any document you have not read or do not understand.
• Talk to someone you trust Contact a nonprofit housing organization to review the loan before you sign anything.
• If you think you are a victim of home loan fraudFile a complaint with the your local attorney general's office.
• Right of rescission You have three days to cancel a home equity loan! If you review the loan terms and change your mind, contact the lender to cancel and don't take no for an answer.

Who Do Predatory Lenders Target?

Predatory lenders look for homeowners who have a lot of equity in their homes, but have poor credit and need cash. Seniors, people of color, and low- and moderate- income households are frequent targets. Often, a victim of predatory lending will be in a financial crisis brought on by an illness, a sudden loss of income due to job loss or death of a spouse, or a need for major home repairs. The victim may have fallen behind on loan payments and may be facing foreclosure.

What If I Think I Have a Predatory Loan?

Get help from a trusted source. Contact a nonprofit housing organization or contact an attorney. Most communities have offices that provide free legal services to individuals with limited income. The state Resource Guide in Route 4 includes contact information for legal help in your area.

In addition, you can look in the community services pages of your phone book or look in the Yellow Pages under "Legal Services" for the phone number of the local program. The American Bar Association has a directory of volunteer (pro bono) lawyer programs. These programs use local lawyers who have agreed to provide free legal services. The following website can help you find assistance in your area, www.findlegalhelp.org.

Loan modifications are also subject to scams. In response to the proliferation of loan modification scams, NeighborWorks® America launched a national public education campaign to empower homeowners to identify, avoid, and report loan modification scams. Visit the website of Loan Modification Scam Alert at www. loanscamalert.org. to learn about some of the most common scams, hear testimonials, and report suspected scams. You may also call at 888-995-4673.