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Learning to spot and avoid bad loans

Offers of credit are everywhere. But not all credit is good. Whether you want to borrow money to buy a house, or you just need money for other expenses, you need to be very careful that you get a loan that meets your needs and that you can afford. Otherwise, you may find yourself in great financial difficulty, and you may end up losing your home. You need to know what to look for in a loan, and you should compare loan terms to make sure you get the best terms. If you don't understand what you are reading, ask for help. Never give in to pressure.

There are many good lenders. But there are people who will act like they want to help you and actually do you harm. Lenders are not doing you a favor - they are making money. You need to watch out for bad loan terms and, after you've signed a loan, look out for dishonest practices in how your loan is serviced.


Spotting or Avoiding Bad Loans

You need to know how to spot bad lenders and loans! Click on the link below for more information and to:

  1. Find out if you're at risk.
  2. Learn simple ways to spot bad loans.
  3. Know who to call when you think it's happening to you.

Click Here for the Beat Bad Loans Brochure
Or call us at (804) 354-0641, and we'll find you the help you need.


How to spot and avoid bad practices after you've signed (bad or dishonest servicing of your loan)

WARNING SIGNS OF ABUSIVE PRACTICES DURING SERVICING OF THE MORTGAGE

  1. Not responding to requests for information on amounts due or escrow account balances and payments
  2. Not making appropriate payments from the escrow account
  3. Force-placed homeowners' or flood insurance
  4. Delays in crediting payments, resulting in late fees
  5. Failure to provide good payment information on borrowers credit reports
  6. Failure to provide accurate loan balance and payoff amount
  7. Placing homeowner in a forbearance agreement that when paid as agreed, will still leave the homeowner behind in payments
  8. Mailing payments back to borrower after foreclosure proceedings have begun
  9. Misapplication of mortgage payments
  10. Adding bogus fees (inspection fees, corporate advances)
  11. Erroneous analysis of the escrow account resulting in the borrower paying more than is owed.

If you think there's any possibility that you have a bad loan or bad loan servicer, call HOME at (804) 354-0641, and we'll either help you ourselves or find you the help you need.


Foreclosure Rescue Scams

Are you behind in your mortgage payments? Have you been contacted by an individual, or investor eager to help "rescue" from you pending foreclosure. Homeowners BEWARE! Foreclosure Rescue Scam artists are out to steal from you the very thing you are trying to keep - your home.

If you are in foreclosure and desperate to save your home, you need to be extremely cautious of any claim offering to "rescue your home from foreclosure."


Avoid these Scams!

There are books, late night TV commercials, and websites telling people how to get rich quickly by purchasing foreclosed homes. When your foreclosure becomes public, many opportunists may approach you offering an "easy way out." Be cautious, their intent is not to help you, but to profit from your misfortune.

Be careful who you trust. There are reports of clergypersons, real estate agents, attorneys, and mortgage lenders profiting from these scams, and they may refer you to someone who will take advantage of your situation.

First of all, don't believe what someone is telling you without reading the documents you sign carefully. Scam artists frequently lie about what the documents say because they know worried people are unlikely to read them.

Other times, they tell you that certain actions will save your property, but in reality, they don't. Foreclosure rescue scams usually involve the homeowner relinquishing the legal right to their property by way of quit claim deeds, land contracts or lease - buy back agreements.


Quit Claim Deeds

Many homeowners believe that by simply deeding the property to another person they will stop the foreclosure with the lender. Scam artists promise to take over the payments, pay the homeowner a sum of money, and then let them stay in the house until it sells at a later time.

This approach usually fails, leaving the homeowner without their equity and a ruined credit rating. Why?

  • Although the property is transferred, you are still liable for the mortgage balance. In other words, you don't have the house, but you still owe the money. The foreclosure process continues, and you lose all other valid methods to stop the foreclosure.
  • Once the property is transferred you have no rights to ensure that the investor is making the underlying mortgage payments
  • Lenders will not negotiate with a real estate opportunist, only the original home owner

Don't ever quit claim the interest to your property in a foreclosure


Lease - Buy Backs

Lease - buy backs are another popular scam to take away your property rights. In a lease - buy back, the homeowner agrees to sell the property for the mortgage balance, and lease it back from the investor. The homeowner is now only a tenant, and will be thrown out if the lease payments are late. Imagine how much more difficult it will be to negotiate with a real estate speculator compared to your lender if you fall on hard times! If you ever want to buy the home back, the opportunist will only sell it back at an inflated price.


Sale on Land Contract

The sale back on land contract works the same way as a lease - buy back. The homeowner deeds the property to the investor, and then is placed on a land contract for a set (and often inflated) purchase price. Although the land contract gives the homeowner better legal protection than a lease, it is only the "lesser of two evils". A land contract should only be considered if the investor can pay off the mortgage balance, because for most mortgages, the balance becomes due on a sale or default. If the speculator fails to pay off the balance, the foreclosure continues and you both lose.

Think carefully before you deed away your property rights to anyone, but especially to a private real estate speculator. Talk to a certified housing counselor at Housing Opportunities Made Equal, or an honest, reputable attorney who will look out for your best interests.

In Virginia many of these practices are unethical but not illegal. So, you must be SMART and protect yourself.

THINGS YOU SHOULD DO

  • Be suspicious of anyone who contacts you by mail, phone or in person offering to rescue your home from foreclosure.
  • Become knowledgeable about the foreclosure process in the state of Virginia. You can find out more about this at the Virginia Poverty Law Center's website.
  • Contact your lender or a HUD-approved counseling agency like HOME to explore loan workout options.
  • Contact a reputable attorney and discuss Chapter 13 bankruptcy as a possible alternative to foreclosure. You can keep your home under this bankruptcy plan.
  • Never sign anything you don't understand.
  • Never sign a power of attorney over to anyone
  • Never sign a quit claim deed
  • Never accept verbal agreements or promises. Get agreements in writing-even if you don't sign them.
  • Ask for customer references. Call the Better Business Bureau, Consumer Affairs, or the State Bureau of Financial Institutions to see if a complaint against the individual or company is on file.