FTC FACTS for Consumers
Home Equity Loans
D o you own your home? If so, it’s likely to be your greatest single asset.
Unfortunately, if you agree to a loan that’s based on the equity you have in your
home, you may be putting your most valuable asset at risk.
Homeowners — particularly elderly, minority, and those with low incomes or poor credit
— should be careful when borrowing money based on their home equity. Why? Certain
abusive or exploitative lenders target these borrowers, who unwittingly may be putting their
home on the line.
Abusive lending practices range from equity stripping and loan flipping to hiding loan terms
and packing a loan with extra charges. The Federal Trade Commission (FTC) urges you to
be aware of these loan practices to avoid losing your home.
Facts for Consumers
You need money. You
don’t have much income
coming in each month.
You have built up equity
in your home. A lender tells you that you could
get a loan, even though you know your income
is just not enough to keep up with the monthly
payments. The lender encourages you to “pad”
your income on your application form to help get
the loan approved.
This lender may be out to steal the equity you
have built up in your home. The lender doesn’t
care if you can’t keep up with the monthly
payments. As soon as you don’t, the lender will
foreclose — taking your home and stripping you
of the equity you have spent years building. If you
take out a loan but don’t have enough income to
make the monthly payments, you are being set up.
You probably will lose your home.
hidden Loan Terms:
The BaLLoon PaymenT
You’ve fallen behind in your mortgage payments
and may face foreclosure. Another lender offers
to save you from foreclosure by refinancing your
mortgage and lowering your monthly payments.
Look carefully at the loan terms. The payments
may be lower because the lender is offering a loan
on which you