In Scams, Uncategorized on June 21, 2012 at 9:41 pm
Today I want to talk about one of the oldest scams in the book. It’s called a bait-and-switch. Basically what happens is, the victim is offered a great deal, but when it comes time to sign on the dotted line, the deal has changed. This is what happened to one of my clients, a contractor from New York named John.
John had a nice low interest mortgage, but he wanted to add an addition on to his home, which he could rent out for some extra income. He was a building contractor and planned to do the work himself. So far, so good. But it was still a costly project in materials alone, so he refinanced his house to its full market value, borrowing an extra $40,000 above what he owed on his current loan to pay for the project, borrowing a total of $245,000.
“The brokers I was dealing with were offering a fixed rate 5 percent loan,” John said. “The day before we were set to close, a broker from the company called to reschedule it. They had me go to their office at midnight to sign the papers.”
Now, let me just pause the story, and say that if a business deal needs to be consummated at midnight, it’s probably not a good sign. Let’s continue.
“John, who was this company that was doing business at midnight?” I asked him.
“I had only spoken to them over the phone. When I showed up at midnight, their office was in a storefront in a seedy part of town. Then they told me they couldn’t get me the fixed rate mortgage; they could only get me an adjustable rate mortgage. I was all set to start work on the addition, and I even ordered some of the materials so I went through with it.”
Now, three years later, his payments have doubled because of the screwy loan terms. With his own contracting business not doing well, he is probably going to lose the house.
“I should have known better,” he said. “It’s my fault.”
That one really made me think. This guy was a building contractor from Brooklyn. And he wasn’t streetsmart enough to walk away from a mortgage loan being made at midnight, in a storefront with the terms changed at the last minute?
Now, forget the fact it was midnight in a seedy part of town. Anytime, and I mean anytime, you find the terms of a potential business transaction being changed on you at the last minute, back out of the deal. Do not fall for the old bait-and-switch.
In Housing Horror Stories, Scams on August 14, 2010 at 12:32 pm
Image via Wikipedia
Instead of checking out HSBC’s false claims, he accepts their deal and will soon be losing his house
A lot has been written about predatory lending practices employed during the housing boom. But the following was one I hadn’t heard of in the news.
The victim was a man from Texas who at one point had a nice 6 percent fixed interest rate mortgage. But in 2006 he refinanced his house with an adjustable rate mortgage, the rate had since soared to 10 percent, and his payment had gone through the roof.
Why would anyone do such a thing? This man told me that in 2006 he received a phone call from megabank HSBC, warning him that if he didn’t take this horrible refinancing deal they were offering, another bank could buy his mortgage and change the terms to be even worse.
“HSBC called me out of the blue,” he said. “The guy told me that any company could buy my mortgage, and they could change the terms to whatever they wanted. The guy said I should just refinance with them, so I would know what I was getting.”
“Mortgages are bought and sold everyday,” I said. “Whoever buys your mortgage can’t just change the terms on you. HSBC actually told you this?”
“Yup. And I panicked.”
This man was screwed. There was no way he could afford the house payment. And he couldn’t refinance again because like so many, the value of his home had dropped below what he owed on the mortgage.
This man was blatantly lied to, but instead of checking out HSBC’s claim, he unthinkingly rushed into their offer out of ignorance and fear.
If only he’d done some research. Most credit counseling agencies like mine offer mortgage counseling where the whole process is explained and all questions answered. If only he had called my agency before accepting HSBC’s deal. He would have discovered quickly that the con man offering this horrible loan was lying to him. Nobody can just change your loan terms if they buy your loan.
Please learn from this man’s experience. If you intend to get a mortgage, and you don’t know a lot about how the mortgage industry works, do your homework first. Just an hour on the phone could save you from ruin, just like it could have saved this man.
In Scams, Uncategorized on August 9, 2010 at 1:44 pm
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Outrageous fees are the norm with these companies
Many people who get into credit card debt will sign up with a debt settlement company for representation in negotiating a settlement of the debts. Here is how a debt settlement company works: They instruct you to stop making your credit card payments, and instead, to send all that money you would have sent to the credit card company to them.
Their promise is that the money you send them will build up in a savings account, and when it reaches a certain amount, they will use that money and their expert negotiating skills to settle your debts for pennies on the dollar.
That’s the plan anyway.
But it’s a scam. They extract such high administrative fees out of the money you send them, there is little to go into the savings account that is supposed to be building up. And after you go a few months without making any payment to the credit cards, those credit cards will sue you for non-payment. They’ll seek to garnish your wages or take the money from a bank account. Do not fall for this scam.
The following is a conversation I had just last week with a client who had signed on with one of these debt settlement companies.
“My credit card is suing me,” said Alex from Hawaii. “I tried a debt settlement company but it didn’t work.”
“How much did you end up paying them in fees?” I asked.
“Tons! You wouldn’t believe what they took!”
“And the credit card company sued you after you’d stopped making the payments, right?”
“That’s exactly what happened,” Alex said.
I hate to generalize, and there may actually be some debt settlement companies out there who do not rip off their clients.
But remember, if you want to negotiate a settlement on your credit card debts, just call up and negotiate it yourself. No company, no law firm, is going to say anything that you can’t say yourself.