July 17, 1998	Consumers Union Washington DC Office

The following are tips for consumers considering a second mortgage or home equity loan:

• Shop around. Call several savings and loan institutions, banks and mortgage lenders to obtain information about current interest rates, fees and points.
  
• Beware of entering into a second mortgage/home equity loan transactions with anyone who comes to your door or which you did not initiate or solicit.
  
• Beware of anyone who tries to convince you to take to a second mortgage/home equity loan with the following characteristics:
  

  A loan offered in connection with an unsolicited home improvement contract.
  

  The loan is made solely on the equity value of your home, not on your ability to repay the loan.
  

  The interest rate is very high, greatly exceeding current market rates.
  

  The loan is set up as an "interest only, non-amortizing or partially amortizing loan" with a large balloon payment that is impossible to meet. This could cause default and foreclosure.
  

  The lender or broker requires you to pay high and non-refundable application fees.
  

• Protect yourself. Never sign any documents which you do not understand or which put your home on the line without first consulting with an attorney or housing counselor.
  
• Never sign blank documents or documents with blank spaces.
  
• Do not give in to high pressure tactics. If the salesperson or loan agent will not leave you a copy of the loan papers to read over before you sign – look for another lender.
  
• Know your rights. The Federal Truth in Lending Act requires a lender to inform you of your right to get out of a loan contract within three days of signing the loan documents whenever your home is used as security for a home equity loan. If your lender failed to provide you with all of the required disclosures regarding the terms and cost of your loan and your rights, you may have up to three years to rescind the contract.
  
• Beware of scams which attempt to take advantage of individuals with similar interests or affinities. Investigate offers for home equity loans with equal care and caution even if the loan agent is someone you know.
  
• Remember, a scam artists’ greatest enemy is a well-informed public.

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