March 2, 2022
Did you know that the average senior homeowner has $261,000 in home equity — 38% more than the average 45-54 year-old? That makes them prime targets for crooked lenders and predatory mortgage brokers. Fortunately, there are some simple rules you can follow to protect yourself.
On the Internet, Everyone Looks Legit
Shopping for a loan usually begins online these days. Unfortunately, it’s hard to tell legitimate lenders from predatory ones just from a website. Don’t trust a company simply because it looks good online.
First, look for an NMLS number. NMLS stands for Nationwide Mortgage Licensing System. All lenders must have a corporate NMLS number and all loan officers and mortgage brokers must have a personal one as well. You should look up both numbers here. If you can’t find both NMLS numbers, do business with someone else.
Second, understand that many scammers use “ropers” whose job it is to find you, gain your trust, and direct you to them. Many of these people call themselves “financial advisors” or “mortgage consultants.” Make sure anyone who calls themself a financial advisor or consultant has a license by checking them out here.
Third, don’t fall for an “affinity” scam. That’s when a person tries to gain your trust by claiming to be from your hometown or home country or even to have the same illness as you. Sometimes they pretend to be veterans or come from military families. Don’t be fooled by scams like these.
The Equity Stripping Scam
Equity stripping is like when you go to buy a car or rent a vacation place and the fees start adding up. But with a mortgage, you’ve put in so much time and effort that it's harder to walk away. Take a close look at the fees and make sure you get a Closing Disclosure and Good Faith Estimate at least three days before you sign anything.
Note that small private lenders are exempt from federal disclosure requirements. If you’re going to borrow from such a lender, make sure you have a lawyer look over the paperwork. Better still: Just don’t do it.
Watch out for balloon payments that will force you to refinance one or more times. The fees will add up and you might end up with significantly less equity in your home than you started with.
Predatory Servicing
Predatory lenders often sell their loans to investors who then change the servicing terms so borrowers end up making late payments and have to pay penalties or even defaulting. Sometimes they’ll charge late fees or file for foreclosure even when the borrower is not late or in default.
Wrongful foreclosures happen all the time. Lenders know it’s hard to get a lawyer when you have no money and that the foreclosure process intimidates most people. In fact, many victims feel ashamed—like they’ve done something wrong! If you start to notice unexplained fees or get a late payment notice, don’t ignore it. If you contest the charges, put it in writing. If you do receive a default notice or foreclosure notice, contact a lawyer. Do not ignore it.
The Takeaway
- Don’t trust a company just because it has a nice website.
- Don’t trust a person simply because you can relate to them.
- Check to see that lenders, mortgage brokers, and financial advisors are licensed.
- Don’t borrow from lenders who aren’t required to provide federal disclosures.
- If you get a foreclosure notice, contact a lawyer or a HUD counselor right away.
SafetyDeed protects senior homeowners against predatory lenders and wrongful disclosures. We verify identities, enforce disclosure laws, and prevent unauthorized servicing changes for a flat one-time fee.
