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FBI agent warns about predatory lending in home mortgages
Jeff Lanza tells seniors bank robberies pale compared to fraud in mortgage industry
By: Gene Hanson
Jeff Lanza, special agent for the FBI in Kansas City, recently told a group of senior citizens that if they mortgaged their homes, they could be at risk of losing them because of predatory lenders.
“The home mortgage industry is huge and unregulated,” Lanza said Sept. 12 at Northland Neighborhoods in Kansas City. “In 2005, bank robberies across the nation totaled $66 million, but mortgage fraud totaled $1 billion. There are no surveillance cameras, and you don't need to steal a get-away car to close on a home.”
He said suspicious activity reports on mortgage fraud filed with the FBI reached more than 36,000 in 2006. That's up from 4,200 in 2001.
He said 70 percent of the loans in the troubled subprime mortgage market involved brokers.
“Brokers are not concerned about the quality of loans,” Lanza said. “They are concerned about the quantity of loans. The more they sell, the more commission money they make. The higher the interest rate they sell, the higher their commission.”
He also dispelled a couple of myths in the home mortgage market. He said appraisers were not always correct in their appraisals, and bankers often lent money just to lend money, not on the ability of the borrower to pay it back.
In addition to fraud, scams are apparently surfacing in the mortgage market.
Lee McClain, vice president of mortgage banking at BankLiberty, said telemarketers were calling selected homeowners advising them the bank that held their mortgage was closing, leading them to believe they must refinance immediately or be forced to pay off the entire loan when the lender goes out of business.
“We have had a former client call us scared to death because of this,” McLain said. “These people are preying on their fears. Even if the lender goes out of business, the homeowner's loan is still in place and a company like the Resolution Trust Corp. will step in and service the loan.”
Lanza offered the following tips on home refinancing.
- Don't refinance to pay off credit cards or other debts. If you fall behind on credit card payments, you might get a call from a debt collector. But if you fall behind in your home mortgage payments, you can lose your home in only 20 days.
- Ask questions: What is the interest rate? Is it fixed, or variable? What are the loan fees? Is there a broker fee? What is the monthly payment? Does it include taxes and insurance?
- Shop around for financing. Lenders must give you a good-faith estimate within three days of your loan application that includes the cost of the loan.
-Believe only what you read, not what the lender tells you. You can trust only what is written in the loan contract. If you feel pressured to sign before you read it, don't sign it.
- Free legal help is available through Legal Aid of Western Missouri at (816) 474-6750.
Business Editor Gene Hanson can be reached at 389-6638 or ghanson@npgco.com.
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“The home mortgage industry is huge and unregulated,” Lanza said Sept. 12 at Northland Neighborhoods in Kansas City. “In 2005, bank robberies across the nation totaled $66 million, but mortgage fraud totaled $1 billion. There are no surveillance cameras, and you don't need to steal a get-away car to close on a home.”
He said suspicious activity reports on mortgage fraud filed with the FBI reached more than 36,000 in 2006. That's up from 4,200 in 2001.
He said 70 percent of the loans in the troubled subprime mortgage market involved brokers.
“Brokers are not concerned about the quality of loans,” Lanza said. “They are concerned about the quantity of loans. The more they sell, the more commission money they make. The higher the interest rate they sell, the higher their commission.”
He also dispelled a couple of myths in the home mortgage market. He said appraisers were not always correct in their appraisals, and bankers often lent money just to lend money, not on the ability of the borrower to pay it back.
In addition to fraud, scams are apparently surfacing in the mortgage market.
Lee McClain, vice president of mortgage banking at BankLiberty, said telemarketers were calling selected homeowners advising them the bank that held their mortgage was closing, leading them to believe they must refinance immediately or be forced to pay off the entire loan when the lender goes out of business.
“We have had a former client call us scared to death because of this,” McLain said. “These people are preying on their fears. Even if the lender goes out of business, the homeowner's loan is still in place and a company like the Resolution Trust Corp. will step in and service the loan.”
Lanza offered the following tips on home refinancing.
- Don't refinance to pay off credit cards or other debts. If you fall behind on credit card payments, you might get a call from a debt collector. But if you fall behind in your home mortgage payments, you can lose your home in only 20 days.
- Ask questions: What is the interest rate? Is it fixed, or variable? What are the loan fees? Is there a broker fee? What is the monthly payment? Does it include taxes and insurance?
- Shop around for financing. Lenders must give you a good-faith estimate within three days of your loan application that includes the cost of the loan.
-Believe only what you read, not what the lender tells you. You can trust only what is written in the loan contract. If you feel pressured to sign before you read it, don't sign it.
- Free legal help is available through Legal Aid of Western Missouri at (816) 474-6750.
Business Editor Gene Hanson can be reached at 389-6638 or ghanson@npgco.com.
Comments on "FBI agent warns about predatory lending in home mortgages"
Comments are limited to 200 words or less.Maher Soliman wrote on Feb 17, 2008 10:26 PM:
" REAL ESTATE
Too Little, Too Late?
A new plan promises relief to homeowners facing foreclosure, but it may not be enough.
Feb 12, 2008 | Updated: 5:13 p.m. ET Feb 12, 2008
According to Maher Soliman, a senior housing industry expert and secondary compliance officer “The housing market in America and KC especially, WILL NOT be restored to a level of stability until every homeowner can afford the mortgage debt secured against their residence". Soliman is a managing director for NLS and provides a website called www.borrowerhotline.com
He goes on to say that "every homeowner who is upside down due to instances of broker criminal activity, lender negligence or a predatory loan, will threaten the neighborhood with a foreclosure. What this means is another potential instance for an artificially propagated liquidation, aka lender REO, at a price significantly below the market price". It distorts values and hurts resale chances at a true value . He calls the "true" market price to be that value whereby supply and demand is proportionate, in conjunction with available affordable financing.
See 360blog@Yahoo.com//borrowerhotline
"
Too Little, Too Late?
A new plan promises relief to homeowners facing foreclosure, but it may not be enough.
Feb 12, 2008 | Updated: 5:13 p.m. ET Feb 12, 2008
According to Maher Soliman, a senior housing industry expert and secondary compliance officer “The housing market in America and KC especially, WILL NOT be restored to a level of stability until every homeowner can afford the mortgage debt secured against their residence". Soliman is a managing director for NLS and provides a website called www.borrowerhotline.com
He goes on to say that "every homeowner who is upside down due to instances of broker criminal activity, lender negligence or a predatory loan, will threaten the neighborhood with a foreclosure. What this means is another potential instance for an artificially propagated liquidation, aka lender REO, at a price significantly below the market price". It distorts values and hurts resale chances at a true value . He calls the "true" market price to be that value whereby supply and demand is proportionate, in conjunction with available affordable financing.
See 360blog@Yahoo.com//borrowerhotline
"
Ted Janusz wrote on Sep 22, 2007 9:44 PM:
" The Top 10 Mistakes Mortgage Borrowers Make:
1. Not knowing which mortgage fees the borrower can and cannot negotiate.
2. Choosing and trusting the first loan officer the borrower interviews.
3. Using an interest-only or "payment option" adjustable-rate loan primarily to qualify for a more expensive house than you could normally afford.
4. Thinking the interest rate is always the main thing.
5. Not comparing the final fees listed on the closing documents to the up-front estimates to avoid the lender "packing" the loan.
6. Not knowing if the mortgage has a pre-payment penalty.
7. Thinking that renting is always just throwing money away.
8. The borrower does not know if he or she is paying a back-end yield spread or Service Release Premium.
9. Paying for mortgage life insurance, credit insurance or other expensive lender add-ons.
10. Paying hundreds of dollars to have a company set up a biweekly mortgage payment plan, something the borrower can generally do for herself or himself.
From "Kicback: Confessions of a Mortgage Salesman" "
TOM wrote on Sep 22, 2007 5:53 AM:
" HOW CAN YOU LOSE YOUR HOME IN 20 DAYS
iT TAKES 90 DAYS FOR A BANK TO START
THE FORCLOSER PROCESS.i THINK PEOPLE
NEED TO TAKE RESPONSIBILITY FOR THERE
OWN ACTIONS AND STOP BLAMING EVERY ONE.
HELL IF YOU DONT LIKE YOUR HOME LOAN BLAME THE BANK OR BROKER AND GO TO YOUR LOCAL PROSECUTOR OR FBI AGENT.
TELL THEM YOUR A VICTIM. SO YOU CAN WALK WAY FROM YOUR HOME AND NOT BE RESPONSABLE.SO YOU CAN FEEL OK ABOUT WALKING. YES I BELIEVE THAT SOME PEOPLE HAVE BEEN USED DUE TO THIER
LACK OF INTELLIGENCE.THIS HAPPENS IN ALL BUSINESS.STOP BLAME EVERYONE
EXPECT THE CONSUMER.IM SURE THE CONSUMER INJOYED THE CASH THEY TOOK OUT OF THERE PROPERTIES AND PAID OF THERE CREDIT CARD SO THEY COULD CHARGE UP MORE.
"