TALLAHASSEE -- (Feb. 9, 2007) -- Attorney General Bill McCollum (http://myfloridalegal.com/) today issued a consumer advisory warning Floridians of common mortgage fraud scams. Mortgage scams were among the top ten categories of complaints received by the Attorney General’s Office last year. As National Consumer Protection Week draws to a close, McCollum again encouraged residents of the state to be aware of scams and fraud aimed at Florida homeowners.

There are several variations of home equity scams of which Floridians should be aware. Equity stripping occurs when a lender encourages a consumer to manipulate their loan application in order to qualify for a greater loan amount. Loan flipping involves lenders who repeatedly encourage consumers to refinance their loans, which may require them to borrow more money and as a result accumulate higher fees. Other scams include baiting and switching, where the lender offers one set of terms prior to the loan application and then pressures consumers to agree to a different set of terms after the application is signed. Deceptive loan servicing, another common complaint, happens when lenders do not provide their clients with accurate or complete account statements and payoff figures.

Consumers shopping for a mortgage loan should take into consideration high interest rates and additional costs which could place undue financial burdens on them, Attorney General McCollum cautioned. He encouraged Floridians to shop around before choosing a lender and reminded them not to sign a loan agreement if the terms are not the same as those they were given when they applied. Consumers should also ask for explanations of any dollar amount, term or condition they don’t fully understand. If using a broker, General McCollum urged prospective homebuyers to research brokers’ credentials to ensure they are properly licensed and certified before entering into a contract.

The Attorney General’s Office provided the following tips to consider when applying for home equity loans:

Ask specifically if credit insurance is required as a condition of the loan

Keep careful records of any amount paid

Check contractors’ references for any construction and get more than one estimate

Read all items on the contract or application carefully

Never sign an application or contract with blank spaces

Lenders should never pressure applicants

The Home Ownership and Protection Act of 1994 addresses certain unfair and deceptive practices in home equity lending. The law establishes requirements for certain loans with high rates or high fees. Additionally, the act prevents balloon payments, which are large lump-sum payments scheduled at the end of a series of considerably smaller periodic payments and negative amortization which arises when the mortgage payment is smaller than the interest due and causes the loan balance to increase rather than decrease. The law also prevents default rates that are higher than pre-default rates and most prepayment penalties.

Consumers who believe they many have complaints about a mortgage scam may call the Attorney General's Fraud Hotline at 1-866-9-NO-SCAM (1-866-966-7226). Complaints can also be filed at http://myfloridalegal.com.

SOURCE: Office of the Attorney General of Florida