Recognizing Predatory Lenders

Most lenders are very reputable but unfortunately, when dealing with foreclosure not all mortgage lenders or credit counselors have your best interest in mind. Beware of predatory lending traps, such as:

• High-Risk Second Mortgages.
  These may seem like a good option, but be cautious – they could further complicate the problem.

• Unsolicited "Loan Approvals."
  Predatory lenders often send homeowners information stating that they are pre-approved for a loan. Although a loan can look very attractive if you are desperate to avoid foreclosure, talk to your lender, not a stranger. If refinancing is your best option, your lender will let you know.

• Refinancing to Access Equity.
  By stripping your home of equity, you may actually be going further into debt – reducing your chances of keeping your home. Again, talk to your lender or a reputable housing counselor before making any decisions.

• Equity Skimming.
  A buyer may offer to pay off your mortgage or sell your property if you sign over the deed and leave your house. Don't do it. Your lender may be able to help you, but usually only if you still live in your home.

• Phony Counseling.
  Reputable counseling is readily available and often free of charge. Be sure you are talking to a reputable agency or the counseling could hurt instead of help you.

• Signing What You Don't Understand.
  Some predatory lenders can be aggressive in trying to get you to sign paperwork. If you are unsure, don't sign. Take the paperwork with you and go over it with a trusted advisor. If the paperwork is legitimate, the lender should have no problem if you want to take the time to review it.

Try to work with people and organizations you know or who have come to you highly recommended by a trusted family member or friend. If you are not sure where to turn, talk to a housing counselor. And if you are not sure about a “deal” you are being offered wait. Don’t sign anything and take the information to a counselor to review.