Home Improvements...the
Newest Scam
Door-to-door salespeople offer "easy
financing" for home improvements and repairs, often working in cahoots
with unscrupulous lenders. The work they recommend may not be needed at
all and often they do a very shoddy or incomplete job. The loans they
arrange are secured by your home and often carry very high interest
rates and other costs. Often the required monthly payment is so far out
of line with the borrower's income that failure to pay and foreclosure
are almost inevitable.
A contractor calls or knocks on your door
and offers to install a new roof or remodel your kitchen at a price that
sounds reasonable. You tell him you’re interested, but can’t afford it.
He tells you it’s no problem — he can arrange financing through a lender
he knows.
You agree to the project, and the
contractor begins work. At some point after the contractor begins, you
are asked to sign a lot of papers. The papers may be blank or the lender
may rush you to sign before you have time to read what you’ve been given
to sign. You sign the papers.
Later, you realize that the papers you
signed are a home equity loan. The interest rate, points and fees seem
very high. To make matters worse, the work on your home isn’t done right
or hasn’t been completed, and the contractor, who may have been paid by
the lender, has little interest in completing the work to your
satisfaction.
About 100,000 homeowners in 20 states are
trapped in this latest contractor fraud - unscrupulous financing.
Research, Examine
and Be on Guard
Anyone considering allowing a contractor
to finance as well as carry out a job should should check the company's
reputation with regulatory authorities before making a commitment. And a
more sophisticated outsider, preferably a lawyer, should look at any
papers before they are signed.
Even a seemingly innocent-looking
application should be examined carefully because many defrauded
homeowners have reported that they were led to believe they were signing
only a loan application or work order.
Some homeowners say they were never even
told the loan would put a lien on their homes or the terms would be
different from what they had been led to expect. This was done, by
leaving some blank spaces and filling these in after the forms had been
signed.
The Lure of Money
is a Powerful Force
If you know you can't get the kind of
money you need on your own, it should be a warning to you to take a
closer look at what you are being offered.
Normally, homeowners do best by getting
their own financing, which lets them control disbursement of funds and
make sure the work is satisfactory before releasing any. The most
popular way is an equity loan, because the interest payments are
deductible from taxable income, but some bankers have been tightening
their requirements for such loans as recession makes incomes fall and
property values sag.
With money tight, many people can't
afford to fix up their homes. These companies know this and deliberately
set out to lure them into contracts that promise home repairs for easy
credit.
Officials also believe the rise of these
frauds may reflect growing competition among remodelers, a result of the
decline of new residential construction that has left many builders and
carpenters in need of alternative work.
Widespread...
Contractors have been charged with
similar schemes in Alabama, Arizona, California, Connecticut, Florida,
Georgia, Illinois, Kentucky, Missouri, Michigan, Maryland, New York,
Ohio, Pennsylvania, South Carolina, Virginia and Washington.
Anyone who has signed for
contractor-related financing in the last few years and is still making
payments should find out if the company, or any lender to which payments
are currently being made, has since been indicted or named in a suit.
This can be done by calling the local office of the state's department
of Consumer Affairs or Attorney General's office (found in the Blue
Pages of the telephone book).
Protect Yourself! Don’t:
-
Agree to a home equity loan if you don’t
have enough money to make the monthly payments.
-
Sign any document you haven’t read or any
document that has blank spaces to be filled in after you sign.
-
Let anyone pressure you into signing any
document.
-
Deed your property to anyone. First
consult an attorney, a knowledgeable family member, or someone else
you trust.
-
Agree to financing through your contractor
without shopping around and comparing loan terms.
All members on this site have signed a
Residential Mortgage Advocate™ (RMA) commitment to be totally upfront about
their fees, rates and items they will need from you.
Been Scammed or Dealt with an Unethical Lender?
Contact Us or Report it to
Your State authorities.
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