Super-Vision

Home Equity Lending Fraud and Abuse-In a Nutshell

Common Scenario #1:

A lender convinces your client to take out a home equity loan that the lender knows the client cannot afford to repay from the beginning. When the client inevitably falls behind, the lender uses this as an opportunity to refinance the loan, thereby digging your client deeper in debt and chipping away at more of your client's home equity. When the client fails to pay, the lender orders the home sold through foreclosure and usually ends up purchasing the property at bargain basement prices.

Common Scenario #2:

A family member or trusted community person convinces your client to mortgage her home for the benefit of someone else, based upon the promise that they will take care of the mortgage payments. Your client mortgages her home, gives her money to the other person and the other person never pays your client back. Your client is stuck with a mortgage payment that she cannot afford and is at risk of losing her house to foreclosure.

 Who's at Risk?

Homeowners who fall into one or more of these categories:

Cash-poor but equity rich

Seniors

Widowed

Minorities

Women

Residents of older neighborhoods in urban areas

 Look for these Warning Signs:

Client experiences a sudden inability to meet normal living expenses.

Client receives unexplained bills in the mail for a loan against their home that they know nothing about.

Client reports that door-to-door salespersons or tele-marketers have signed them up for home improvement work or for a loan for home improvement work.

Clients reports that a loan officer told them that even though they have no income or live on a low fixed income, they qualify for a loan against their home because they have equity.

Client reports that a family member or a trusted community person convinced them to take out a loan against their home for the benefit of someone else.

Client reports that they had no trouble making low, monthly payments on a home equity loan when all of a sudden they received a bill for the entire principle amount plus remaining interest.

Client reports that they "consolidated" their outstanding debts into a home equity loan. Upon further inspection, you discover that the client is actually paying a higher interest rate for the consolidation loan than they were on the debts before the consolidation.

Client's home is in disrepair or uninhabitable after purported "home improvements."

 How You Can Help:

Help prevent home equity lending fraud by educating your clients. Distribute copies of Consumers Union's brochure on home equity lending fraud, "Don't Lose Your Home."

If your client needs money for home improvements, first contact the government sponsored programs in your county listed in Consumers Union's Home Improvement Resources Guide to determine eligibility.

If your client has already been victimized, get help immediately. Assist your client in contacting one of the resources listed below.

Contact your local District Attorney's Office and file a complaint on behalf of your client.

Assist your client in gathering documentation regarding a suspicious home equity loan arrangement. Provide that information to the contact you choose from the Resources list.

Determine if your client's neighbors, friends or family members have been subjected to similar questionable practices by the same lender or home improvement contractor. Provide that information to the District Attorney and to your contact from the Resources section.

Offer to help your client follow up on his or her case or complaint and monitor the progress of the agencies who are assisting. Be an advocate for your client.

Where to Call For Help-Legal Representation, Pre-loan Counseling, Law Enforcement

San Francisco
Bar Association of San Francisco-Equity Fraud Hotline and lawyer referral (415) 782-8903
BASF also accepts cases from other Bay Area counties. Call for information.
Consumer Credit Counseling Service (415) 788-0288 or (800) 777-7526
District Attorney (415) 553-1814

Alameda County
ECHO Housing (510) 271-7931
District Attorney, Real Estate Fraud Unit (510) 569-9281

Contra Costa County
ECHO Housing (925) 679-8023
District Attorney (925) 646-4500

San Mateo County
Consumer Credit Counseling Agency (800) 200-6444
Legal Aid Society of San Mateo (650) 377-0158
East Palo Alto Law Collective (650) 853-1600
District Attorney (650) 363-4677

Santa Clara County
Consumer Credit Counseling Service (800) 969-7526
District Attorney, Real Estate Fraud Unit (408) 792-2880

Consumers Union West Coast Regional Office, August 1998

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All information ©1998 Consumers Union