Friday, September 28, 2007

Beware of New "Mortgage Elimination" Scam


The booming real estate market has allowed many Americans to become “equity rich.” They may not have a lot of cash on hand, but they might have equity in their homes worth several hundred thousand dollars or more. Unfortunately, this increase in home wealth has spawned an equally booming business in equity theft, as more and more thieves find increasingly clever ways to con homeowners out of their equity, their homes, or both. One clever new scam involves companies that promise to completely “eliminate” a homeowner’s mortgage. For a fee of a few thousand dollars, these companies claim that a homeowner can have a free and clear title to their home without paying off the remaining debt. How does this scam work?
This scam is a bit more complicated than other scams that often use simple forgery of identity theft. In this “mortgage elimination” scam, the homeowner places his home in a trust with the mortgage elimination company as the trustee. The trustee files a long, tedious, frivolous, letter of complaint with the mortgage company, giving them a mere ten days to respond. Should the mortgage company not respond within ten days, and they frequently do not, the trust claims that they are then free of the mortgage obligation. Using a questionable power of attorney procedure, the trust then files with the local register of deeds for a release of the home’s title. This makes it appear that the home is now owned without a lien.
The legalities of this range from murky and questionable to outright fraud. It gets even worse when the trustee, claiming clear title to the home, takes out a home equity loan, cashes the check, and promptly disappears. The resulting mess often leaves the original homeowner with a pile of lawsuits, numerous visits from the police and the obligation to pay two mortgages. This scam is currently going on only in certain parts of the country, and isn’t yet widespread. Homeowners can easily avoid being taken by this scam by simply recognizing one simple truth – you cannot simply waive a mortgage obligation away without paying off the loan. Remember, if it sounds too good to be true, it is too good to be true.

How to Avoid a Dirty Mortgage Lender

Refinancing your mortgage can save you money, unless you are taken by a dirty mortgage lender. Predatory mortgage lenders take advantage of homeowners by structuring their loans with excessive rates, fees, and unfavorable loan terms. Here are several tips to help you spot and avoid mortgage refi scams.
Beware Mortgage Lenders that Fail to Disclose
Doing your homework and researching lenders is the best thing you can do to protect yourself and your finances. Using the Internet as a tool you can quickly research dozens of mortgage lenders. Most lenders will provide you mortgage estimates and disclose fees before receiving your application. If you find a mortgage lender is stalling or refusing to provide information you should find another lender. Mortgage lenders are legally required to disclose information about their rates, fees and closing costs for any loan they offer. One common mortgage scam involves not providing you specific information about your interest rate guarantee; the lender stalls until your guarantee expires and then raises the interest rate.
Never Sign Blank or Incomplete Documents
If a mortgage lender asks you to sign blank documents or falsify information on the application, this is a sure indication of a dirty mortgage lender. If you falsify information on a mortgage application you put yourself at risk for legal action and other problems. If you sign a blank document the lender can fill in anything they like; this leaves you open to higher interest rates, periodic refinancing requirements, and even cost your home.
Beware Pushy Sales Tactics
If you feel that a particular lender is being too pushy or is trying to “hard sell” you, find another mortgage lender. Never agree to borrowing a higher amount or accept unfavorable terms in exchange for qualifying for the loan. Honest mortgage lenders don’t try to up-sell you a mortgage that you don’t need; mortgage scammers do this so they can take your home at foreclosure.

How to Avoid Mortgage Scams


If you are in the process of refinancing your home mortgage you want the new loan to be the best mortgage possible. Many homeowners that take out bad mortgages don’t even know they are being taken advantage of. How do you protect yourself from advantageous, predatory mortgage lenders? Do your homework and research mortgage lenders before signing on the dotted line; here are tips to help you avoid being taken on your new mortgage.
The mortgage industry is a highly competitive business. To stay profitable some mortgage lenders resort to underhanded tactics that take advantage of homeowners, especially those with poor credit. Mortgage lender scams can cost you thousands of dollars; dirty lenders can even take your home. Here are examples of mortgage scams you need to avoid.
Beware Home Buyer and Mortgage Seminars
You see ads in the paper from time to time about home buyer seminars promising to secure mortgages for anyone, regardless of credit. If you’re thinking about going to one of these seminars make sure you read all of the fine print and find out what it is costing you. If you are required to pay a large up-front fee, chances are this is a scam. You may want to consult the Better Business Bureau before attending one of these home buyer seminars.
Paperwork Confusion
Some mortgage lenders try to confuse borrowers with their paperwork. This allows them to slip terms and fees into the contract that people would not agree to had they understood what was in the paperwork. Make sure your mortgage lender provides you with a legitimate Good Faith Estimate as required by law and you fully understand everything on this document and in your loan contract.
Beware Reconveyance Foreclosure Scams
Another common scam for homeowners that fall behind on their mortgage are the “avoid foreclosure" scams. A person or company purchases your home and agrees to sell it back to you when you can afford the mortgage payments. This is called Reconveyance, and there are organizations that do this as an honest service. Reconveyance scammers make it nearly impossible to buy back your home and can take your equity in the process.
Reverse Mortgages: Scams to Rip off Seniors
If you are senior considering a reverse mortgage to supplement your income you can protect yourself by using a HUD approved lender. Make sure you compare reverse mortgage offers from at least three different mortgage lenders and that you fully understand all of the terms in the loan contract. You can learn more ways to protect yourself by registering for a free mortgage guidebook: “Five Things You Need to Know About Your Mortgage.”

The Sub Prime Mortgage Lending Crisis

The sub-prime mortgage crisis has shocked and rocked the world of Wall Street and has been front page news in recent weeks. Sub-prime mortgages totaled $600 billion in 2006, accounting for about one-fifth of new mortgages last year and may account for up to 60 percent of all foreclosures in 2007.
Experts say we may feel the repercussions of these events in the financial world for years to come. The sub-prime lending crisis has led to restrictions on the availability of credit for prime lenders and may lead to a US recession.
Sub-prime lending means companies making loans to risky borrowers who do not qualify for market interest rates due to the customer's poor credit history, unemployment or other causes. Sub-prime lending occurs in many financial markets, including mortgage, automobile and credit cards. With the much higher risk comes a much higher payout.
Sub-prime lending has become extremely controversial in recent years and the current crisis was foreseen by many experts. What turned the sub-prime mortgage fall-out into a crisis has been predatory lenders that attempt to gouge sub-prime loaners for as much profit as possible or may be deliberately misleading or lending to borrowers who could never meet the terms of their loans, thus leading to defaults, seizures and foreclosures.
Sub-prime lending is very risky for both lender and borrower due to high interest rates, that's why they are offered at a rate much higher than A-paper or prime loans due to that increased risk.
Due to the recent crisis, hundreds of thousands of borrowers have been forced to default and several major sub-prime lenders have filed for bankruptcy and the US may feel the crunch of this crisis for years to come.

ARE YOU IMPACTED BY THE CURRENT MORTGAGE CRISIS ?

You've heard and read the recent news reports: "The Mortgage Industry is in Crisis". The number of foreclosures are increasing, credit is less available, the subprime industry has collapsed, many companies are out of business and Wall Street is in trouble. What does all of this mean to you as a consumer.
First and foremost it means there will be new regulations in place. Every organization involved in industry oversight is reviewing, analyzing and adopting new policies. Mortgage bankers and lenders are adopting the recommendations and putting them into current policy and procedures for conducting everyday business.
Underwriting guidelines have been tightened considerably, requiring higher credit scores, lower debt to income ratios, verification of income and assets, and scrutinizing documents more thoroughly. One of the problems created recently involved stated income loan programs. Stated income loans were created for borrowers who are self employed or supplementing income, as in the construction trades and service businesses. Consumers don't benefit from all their earned income. Tax deductions may reduce the amount of income eligible to qualify for a mortgage.
Some approved stated income loans weren't based on income reasonable for the job. The income was often made up by unscrupulous loan officers and brokers to make the deal work. Borrowers didn't realize the income was overstated and they were approved for mortgages they couldn't afford to repay.
Stated income loans are not as available now, especially in the jumbo market. If you can find stated income programs, industry reasonability tests are conducted. Borrowers may also be asked if the stated income is accurate and they are reminded that fraudulent information on a loan application is illegal. They may be required to sign an additional document. Stated programs are often not available for salaried, W-2 wage earners.
Borrowers with low credit scores who have been slow paying or have collections or judgments filed against them are having a tougher time qualifying for a mortgage. Qualifying ratios (the percentage of your income used to qualify for a mortgage) are not as flexible and the verification of income and assets needed for down payment and closing c,osts are carefully verified and sourced.
Consumers are wary of ARM's (adjustable rate mortgage's) having heard about the 2/28 mortgage. The 2/28 ARM often had a lowpayment start rate, meaning the initial payments were very low, but not reflective of that the actual interest rate and payment would be later on. Some homeowners, shocked by the higher payment amount, have found themselves in foreclosure and unable to pay it.
With all the foreclosures and restrictive mortgage guidelines, home sales have declined. With the declining market, property values have also declined. The home purchased for $300,000 in recent years may be valued at only $250,000 or less today. Some homeowners owe more than the house is currently worth. Some parts of the country have been hit particularly hard.
With all this bad news, there is some good news. The good news is that interest rates are still relatively low, and if you have good credit and document your income and assets, you will qualify for a mortgage with a low interest rate. Because homes remain on the market for a longer time, there is more room to negotiate the purchase price to your advantage or negotiate a sellers concession. It will probably take a few years for the impact to subside and new regulations to help the industry adjust. The industry will be changed and doing business differently, and that is good news.

THIS IS A REAL MORTGAGE MELTDOWN


It's becoming an all to familiar scenario. Another victim of the mortgage meltdown. Another homeowner that I can't help. Another borrower that doesn't qualify for a mortgage refinance. Yes. Those are the ones that hurt. It doesn't feel quite as bad telling someone that doesn't already own a home that they don't qualify to purchase a home. It's a whole different story when you have to tell someone that is already in their home that you can't help them get refinanced. You can hear the pain in their voices. The homeowners tell you they don't know how much longer they can hang on. They're out of money, out of home equity and out of gas. They've used up their savings.
The saddest part is that I am not just talking about borrowers with adjustable rate mortgages. Oh no, I'm talking about your average homeowner. A homeowner that is having a hard time making their monthly mortgage payment. Their homeowners insurance has sky rocketed here in South Florida. It's doubled or tripled for some homeowners. And Florida real estate taxes are out of this world. In Broward County they are 2% of the value of your home. On a $300,000 home your taxes would be $6,000 per year.
It's crazy but the mortgage meltdown is something that has been brewing here in Florida for quite some time. It wasn't just Florida that the mortgage meltdown was brewing. It was brewing in any area that was hot. Phoenix, Los Angeles and of course Las Vegas. Properties were appreciating so fast that lenders were doing crazy mortgages. How about a $800,000 mortgage with no money down? That's 100% financing. And this was a stated income/stated asset mortgage. All you needed was a good credit score and you were the proud owner of a brand new home. The best part. You invested none of your own money. Sweet, wasn't it?
When homes were appreciating mortgage money was loose and mortgage lenders were practically giving money away. You didn't have to have good credit. You didn't have to prove your income and you didn't need any assets.
Homeowners found themselves suddenly property rich. They wanted to get at their home equity and lenders were only to happy to oblige. It really was a bubble that had to burst.
Now that properties are losing value the mortgage money has dried up. Mortgage lenders and mortgage brokers are going out of business everyday. Credit is tight right now in mortgage lending. The subprime mortgage market is all but gone. Homeowners that had maxed out on their cash out thinking that home appreciation would go on forever were suddenly in over their heads. The difference now is that they don't have the equity in their homes to use as a life preserver.
It's sad, but true. We are in a mortgage meltdown.

THINGS TO KNOW BEFORE APPLYING FOR REVERSE MORTGAGES


As more and more baby boomers are reaching retirement age, they are turning their sights on additional ways to supplement their incomes. In many cases, social security and pensions are just not enough to make ends meet. One of the ways that is becoming increasingly popular is through a reverse mortgage.
Although there are several rules and procedures to follow in applying for a reverse mortgage, once you know what is required the process isn't that difficult. Here is a look at the major steps involved to apply for a reverse mortgage.
It's important to understand that getting this type of loan isn't like walking in and applying for a home equity loan or other type of personal loan. The federal government has laid out certain guidelines and stipulations to follow or your application will be rejected.
1. To get started you will want to familiarize yourself with as much information on reverse mortgages as possible. Things like what they are, what they can do for your individual situation, etc. You can find this information online at our website and many others as well.
2. The second step will be to get the required counseling. The federal regulations mandate that you get credit counseling through an approved association. AARP reverse mortgage credit counseling is by far and away the most popular, but there are many others available as well.
This credit counseling will go more in depth on reverse mortgages and go over all the details and options. You'll discover how they will affect you personally as well as your estate. Although it may seem like a lot of red tape to go through, the counseling is actually quite good and really helps give you a great understanding of this type of financial transaction. You'll know you are making a well qualified and sound financial decision.
3. Now it is time to find a bank or other lender that will make a reverse mortgage loan. Don't rush this step. Applying for a reverse mortgage is a major event and you want to be sure you find the right lender and the right program.
Don't be surprised if this takes 6-8 weeks to complete. You will be asked when applying on how you want to receive payments. It can be a lump sum, monthly installments or even a line of credit if you like.
There will also be closing costs involved with a reverse mortgage loan so keep that in mind. The good news is that these costs can be included in the loan amount if you wish.
Understanding the steps required in applying for a reverse mortgage will help give you the information you need and make the process much easier to complete.
By the way, you can find out more about Applying For A Reverse Mortgage as well as much more information on everything to do with reverse mortgages at http://www.ReverseMortgagesA-Z.com

A SIMPLE GUIDE TO REVERSE MORTGAGES

If you have already chosen reverse mortgage as your trusted partner in the mortgage refinance jungle it's a good time to explore in details the steps involved in securing reverse mortgage. Our simple little guide details the steps involved in getting a reverse mortgage. Be prepared and the entire process will go much smoother.
1. AWARENESS
Homeowner learns about the reverse mortgage program from a news article, advertisement, word-of mouth, etc.
2. ACTION
If necessary, homeowner seeks additional information by contacting a reverse mortgage lender or the National Reverse Mortgage Lenders Association.
3. COUNSELING
Homeowner seeks counseling from a HUD-approved counseling agency, or AARP-trained telephone counselor. Counseling is mandatory regardless of which reverse mortgage product you choose. Counseling is usually conducted face-to-face, unless you use an AARP counselor. The counselor provides supplemental information on reverse mortgages, determines whether you're eligible to get a reverse mortgage, and discusses other options that may be available to assist with your daily living. The homeowner will be given a certificate to give to the lender as proof they were counseled.
4. APPLICATION / DISCLOSURE
Homeowner fills out loan application and selects payment option: fixed monthly payments, lump sum payment, line of credit, or a combination of these. Lender discloses to homeowner the estimated total cost of the loan, as required by the federal Truth in Lending Act. Lender collects money for home appraisal. Homeowner provides lender with required information, including photo ID, verification of Social Security number, copy of deed to home, information on any existing mortgage(s) on property, and counseling certificate.
5. PROCESSING
Lender orders appraisal, title work, lien payoffs, etc. An appraiser comes to your home. The appraiser assigns a value to the home and determines the physical condition of the property. If the appraiser uncovers structural defects that require repair, the homeowner must hire a contractor to complete the repairs after the reverse mortgage closes.
6. UNDERWRITING
After receiving all pertinent information and data, lender finalizes loan parameters with homeowner (i.e., determining payment option, frequency of loan interest rate adjustments) and submits loan package to underwriting department for final approval. Currently, it can take anywhere from 4-8 weeks (sometimes sooner) to complete the underwriting of a loan package.
7. CLOSING
If the loan package is approved, closing (signing) of loan is scheduled. Initial and expected interest rates are calculated. Closing papers and final figures are prepared. Closing costs are normally financed as part of the loan. Lender or Title Company has homeowner sign loan papers.
8. DISBURSEMENT
Homeowner has three business days after signing papers in which to cancel the loan. Upon expiration of this period, the loan funds are disbursed. Homeowner accesses the funds in the form of the payment option selected. Any existing debt on the home is paid off. A new lien is placed on the home. The homeowner may use the loan proceeds for any purpose. During the life of the loan, the loan "service provider" disburses monthly payments to the homeowner (if this option is chosen), advances line of credit funds upon request, collects any repayments on the line of credit, and sends periodic statements.
9. REPAYMENT
Homeowner does not make any monthly mortgage payments to lender during the life of the loan. The loan is repaid when the homeowner ceases to occupy the home as a principal residence. The loan may be repaid by the homeowner or the heirs/estate, with or without a sale of the home. The repayment obligation can't exceed the home's value or sales price.
To find more information about mortgages and home loans, please visit www.lendgo.com
This article can be reprinted as long as all links below remain active and are posted with the article.
Cyrus Zahabian is an editor at Lendgo.com - A consumer guide to home loan and mortgage, credit card, credit repair, and credit reports. For more information regarding these topics simply follow the links below:
Mortgage Refinance - Mortgage basics, tips and advice.
Credit Card - Credit card reviews and advice on selecting the right credit card according to your needs.

THE VERY BEST REVERSE MORTGAGE PAYMENT PLAN

Reverse mortgages are products available only to senior citizen homeowners (over age 62) that allows them to take cash equity from their homes to use for living expenses. Under a reverse mortgage, the lender makes loan payments to the borrower and the loan is repaid when the house is sold or the homeowner dies. The HUD/FHA Home Equity Conversion Mortgage (HECM) is by far the most popular type of reverse mortgage.
The HECM program offers borrowers a variety of options by which they can elect to be paid the borrowed funds:
line of credit - by far the most popular option which allows homeowners to draw funds as needed;
lump sum - similar to a regular home equity loan with funds paid at closing;
term - fixed payment for specified number of years (e.g. 10 years);
tenure - equal monthly payments for as long as the borrower remains in the home
combinations of the above
Nearly four out of five HECM borrowers (78%) opt for the line of credit payment option. There are two big reasons why people feel this is the best choice:
First, funds are drawn only when needed and interest accrues only on funds actually drawn-down. This maximizes flexibility and minimizes interest costs. Second, the untapped balance of the line of credit actually grows at a healthy rate until the funds are drawn. This means the size of the loan available to the homeowner can grow.
With features like this it's not hard to see why the line of credit option is so popular. But is this really the best deal for seniors?
Increasingly, research suggests that the lowly tenure payment option - selected by only five percent of borrowers - may be the best financial choice. The tenure option provides guaranteed equal monthly payments for as long as the borrower lives in the home.
For example, studies, such as done by Met Life and the Society of Actuaries, consistently find that a large majority of both retirees and pre-retirees underestimate life expectancies. According to Met Life, not only do people underestimate longevity, they do not view it as a financial risk. Just 2 of 10 (23%) people understand that longevity is the greatest financial risk facing retirees. Inflation is a very significant financial risk, selected by 41% of respondents, but it is important to note that longevity risk is exacerbated by inflation risk.
Like an annuity, the tenure payment option provides a regular monthly income stream that can help protect borrowers from outliving their resources.
Another study from the Center for Retirement Research at Boston College concludes that the HECM lifetime income plan (tenure option) is the best financial choice for seniors under almost all scenarios:
"We find that over a wide variety of assumptions about asset returns, the optimal strategy for all but the most risk tolerant households is to take a reverse mortgage in the form of a lifetime income. We are informed by the National Reverse Mortgage Lenders Association that only a small minority of borrowers choose this option, as most choose a line of credit. Our findings appear to be yet another manifestation of the widely documented reluctance of households to annuitize their wealth in retirement. There are substantial differences in reverse mortgage equivalent wealth among strategies, and in our base case a household with average housing and financial wealth...would be 33 percent better off taking a lifetime income at age 65 relative to taking a line of credit when financial wealth is exhausted." (From "Optimal Retirement Asset Decumulation Strategies: The Impact of Housing Wealth, Wei Sun, Robert K. Triest, and Anthony Webb - November 2006 -
To be sure, there are good arguments against choosing fixed payments. For one, over time inflation will erode the purchasing power of fixed monthly payments. Also, if the homeowner is forced to sell because of declining health or other factor, the loan must be repaid and the monthly income stream stops.
Still, as the reverse mortgage marketplace continues to grow, it is important that potential borrowers consider all payment options. The overwhelming popularity of the HECM line of credit payment option may be more a sign of a "follow the crowd" mentality, not sound financial decision-making.

FACTS YOU SHOULD KNOW ABOUT REVERSE MORTGAGES

Reverse mortgage can be a great opportunity for many Americans who are looking for an opportunity to turn their existing home value into monthly income. Reverse mortgages enable seniors age 62 or older to convert a portion of their home equity into tax free cash that can be used for any purpose, such as retirement needs, paying medical bills or achieving other goals.
“The idea of using home equity to finance retirement is becoming increasingly main stream, even among the current generation of seniors who have traditionally been debt averse,” said Peter Bell, President of the National Reverse Mortgage Lenders Association. “The home increasingly plays a role as a retirement asset.”
With Americans age 62-years-old or older holding an estimated $4.3 trillion in home equity, there is plenty of opportunity for seniors to capitalize on this new way of utlizing the value of their home.
According to the National Reverse Mortgage Lenders Association, the reverse mortgage industry has seen tremendous growth in the last five years. However, only a little more than 300,000 reverse mortgages have been originated in its short history. This represents less than one percent of the $4.3 trillion market.
In the first quarter of 2007 alone, there was a $19 billion increase in senior home equity. As the baby boomers approach retirement age, a larger portion of aggregate U.S. home value will be held by seniors.
"The current estimated level of $5 trillion in senior home value could potentially double to exceed $10 trillion in the next ten years,” said Liz Scholz, Managing Director with the Hollister Group in Washington D.C. While reverse mortages have many advantages, you should discuss the details of reverse mortgage with your financial advisor to ensure that a reverse mortgage is the best opportunity for you.
There are times when a reverse mortgage may not be the best choice for you to make. The NRMLA represents the reverse mortgage industry, serving as an educational resource, policy advocate and public affairs center for lenders and related professionals. For more information, visit http://www.nrmLaonLine.org

SUBPRIME MORTGAGE LOAN FRAUD

The subprime loan debacle will make it more difficult for borrowers to get mortgages and will cause U.S. home prices to fall this year for the first time on record", the National Association of Realtors said.
"The 2007 median price for an existing home likely will decline 0.7 percent to $220,300, the first drop since the real estate trade group began keeping records in 1968 and probably the first decline since the Great Depression," said Lawrence Yun, an economist with the Chicago-based association
With a few dozen of the big name lenders, New Century for example, either filing for bankruptcy or are in dire financial trouble... it seems as though the US Government is currently not willing to accept that this situation is a problem.
“Despite those warning signals the leadership of the Federal Reserve seemed to encourage the development and use of ARMs that, today, are defaulting and going into foreclosure at record rates,” said Chris Dodd, chairman of the Senate Banking committee.
As we saw with the Enron fiasco, it would seem that we should we be expecting to see a similar nightmare in the mortgage lending arena. The difference here is that people are not loosing their 401ks...instead, they are loosing their homes. As a result, federal regulators and legislators are trying to figure out how to help subprime mortgage borrowers who are facing foreclosure. In an effort to help homeowners, various State authorities also have opened fraud investigations against brokers and lenders for allegedly misleading home buyers about the terms and conditions of their loans. This fallout could potentially reshape the mortgage industry.
As more loans are defaulted on and as more lenders file for bankruptcy, there are various types of data may be considered as critical evidence in litigation. These types of data include:
e-mail
plain text and documents
calendar files
databases
spreadsheets
digital faxes
audio files
websites For litigators, this information can help them prove any misleading, potential criminal, or fraudulent business practices by a subprime loan lender. Once an E-Discovery data audit process has started, and a computer forensics or data recovery service implemented, there are the several tasks to complete which provide the electronic evidence in a format which the client and lawyers will accept.

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