When Jean Ervin closed on her house, the papers that she signed were coming so fast and furious that she didn't read all of them. Her mortgage broker made sure of that by scheduling the closing right before the title company closed for the day, so Jean would be rushed through the process. Ervin was so focused on getting a 30-year fixed rate mortgage, she failed to notice she was being saddled with a high interest rate, a prepayment penalty and a $52,000 balloon payment she'd owe at the end of the 30 years. She borrowed $81,000, but the total she'll eventually pay out to own her home will be $281,000.
Jean Ervin's just one of many people with less than perfect credit, who got locked into loans that are so burdensome that it was almost a guarantee they'd lose their home to foreclosure. Jean's getting help to save her home from The Equal Housing Opportunity Council. Katina Combs is a fair lending specialist at EHOC. Combs says she's seen homeowners taken advantage of in many ways; slight of hand to hide the true terms, as with Ervin. She's also seen mortgage brokers falsify documents to make it look like a homebuyer's salary or assets were enough to qualify them for loans that they really couldn't afford.
These unscrupulous practices are just some of the lying and cheating that took place during the housing boom that contributed to the housing bust. The U.S. attorney's office in St. Louis has prosecuted homebuyers for trying to pull off illegal flipping schemes and loan officers and mortgage brokers for committing a variety of mortgage fraud. All of the cases contributed to destabilizing the housing market, toppling a series of dominoes that led to the worst economic conditions since the Great Depression.
While investigators and prosecutors try to catch and convict the bad guys, it's important that homeowners do their part to be informed homebuyers who know how to spot and avoid a scam. Here are just a few tips from the U.S. Department of Housing and Urban Development.
1) Shop for a lender and compare costs. Be suspicious if anyone tries to steer you to just one lender.
2) Don't let anyone persuade you to make a false statement on your loan application. It's illegal.
3) Don't sign anything that you don't understand.
4) Don't let anyone convince you to borrow more money than you know you can afford to repay.
5) Get information about the prices of other homes in the neighborhood. Don't be fooled into paying too much.
Click on one of these links to get more information.
Mortgage fraud resources in MO
Mortgage fraud resources in IL
Mortgage Reform and Anti-Predatory Lending Act of 2009