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The Home Improvement Loan

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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.

The contractor threatens to leave the work on your house unfinished if you don’t sign.

You sign the papers. Only 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.

Credit Insurance Packing
You’ve just agreed to a mortgage on terms you think you can afford.

At closing, the lender gives you papers to sign that include charges for credit insurance or other benefits that you did not ask for and do not want.

The lender hopes you don’t notice this, and that you just sign the loan papers where you are asked to sign.

The lender doesn’t explain exactly how much extra money this will cost you each month on your loan.

If you do notice, you’re afraid that if you ask questions or object, you might not get the loan.

The lender may tell you that this insurance comes with the loan, making you think that it comes at no additional cost.

If you object, the lender may even tell you that if you want the loan without the insurance, the loan papers will have to be rewritten, that it could take several days, and that the manager may reconsider the loan altogether.

If you agree to buy the insurance, you really are paying extra for the loan by buying a product you may not want or need.

Mortgage Servicing Abuses
After you get a mortgage, you receive a letter from your lender saying that your monthly payments will be higher than you expected.

The lender says that your payments include escrow for taxes and insurance even though you arranged to pay those items yourself with the lender’s okay.

Later, a message from the lender says you are being charged late fees. But you know your payments were on time.

You may receive a message saying that you failed to maintain required property insurance and the lender is buying more costly insurance at your expense.

Other charges that you don’t understand like legal fees are added to the amount you owe, increasing your monthly payments or the amount you owe at the end of the loan term.

The lender doesn’t provide you with an accurate or complete account of these charges.

You ask for a payoff statement to refinance with another lender and receive a statement that’s inaccurate or incomplete.

The lender’s actions make it almost impossible to determine how much you’ve paid or how much you owe. You may pay more than you owe.

Signing Over Your Deed
If you are having trouble paying your mortgage and the lender has threatened to foreclose and take your home, you may feel desperate.

Another lender may contact you with an offer to help you find new financing. Before he can help you, he asks you to deed your property to him, claiming that it’s a temporary measure to prevent foreclosure.

The promised refinancing that would let you save your home never comes through.

Once the lender has the deed to your property, he starts to treat it as his own. He may borrow against it, for his benefit, not yours, or even sell it to someone else.

Because you don’t own the home any more, you won’t get any money when the property is sold.

The lender will treat you as a tenant and your mortgage payments as rent.

If your rent payments are late, you can be evicted from your home.

Protecting Yourself
You can protect yourself against losing your home to inappropriate lending practices. Here’s how:

Don’t:
• Agree to a home equity loan if you don’t have enough income 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.
• Agree to a loan that includes credit insurance or extra products you don’t want.
• Let the promise of extra cash or lower monthly payments get in the way of your good judgment about whether the cost you will pay for the loan is really worth it.
• Deed your property to anyone. First consult an attorney, a knowledgeable family member, or someone else you trust.
Do:
• Ask specifically if credit insurance is required as a condition of the loan.
If it isn’t, and a charge is included in your loan and you don’t want the insurance, ask that the charge be removed from the loan documents.
If you want the added security of credit insurance, shop around for the best rates.
• Keep careful records of what you’ve paid, including billing statements and canceled checks.
Challenge any charge you think is inaccurate.
• Check contractors’ references when it is time to have work done in your home. Get more than one estimate.
• Read all items carefully. If you need an explanation of any terms or conditions, talk to someone you can trust, such as a knowledgeable family member or an attorney.
Consider all the costs of financing before you agree to a loan.

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