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StatePoint - Although fraudsters will prey on anyone, many tactics specifically target those facing financial hardship in the wake of a natural disaster.
To help you avoid becoming a victim when you’re most vulnerable, Freddie Mac is providing these tips and insights:
Watch Out for Common Disaster-Related Scams
As the intensity of severe weather events increases, understanding common disaster-related scams can help you avoid them. These include:
High-Interest Loans for Repairs: In this scam, someone may offer to loan you money for home repairs, often at a high interest rate, while you wait for your insurance money. In return, they ask for a post-dated check, your auto title or your tax refund. Although this may provide short-term relief, it’s an example of predatory lending because the high interest rates could end up costing you more in the long term. Read any contract before signing it, and make sure you understand the total cost of the loan, including its terms and fees.
Repair Contractor Prepayment: In this scam, your home repair contractor may ask you to sign a “direction to pay form” that allows your insurance company to pay the contractor directly, even before the repair work is completed. This can leave you vulnerable to incomplete or poor quality work. To avoid this scam, read your contract carefully and do not authorize the full payment amount until you are satisfied with the final product.
Requests for Financial Information: In this scam, a person claiming to be a government employee or disaster relief professional may request financial information, saying they need it to help you recover from a crisis. Protect yourself by never giving anyone your personally identifiable information by phone, email, text or in person without confirming their identity. For example, ask for identification and independently call the entity the person claims to work for.
If You’re Struggling to Pay Your Mortgage, Beware of Fraudsters
If you’re struggling to pay your mortgage after a natural disaster or due to other circumstances and you are facing foreclosure, be on the lookout for two common types of fraud.
Foreclosure Rescue Fraud: In such a scheme, someone may falsely promise to be able to save your home from foreclosure. The fraudster will commonly:
- Require you to sign the title to your home over to them.
- Ask you to sign unfamiliar documents.
- Ask you to share personal information.
- Charge you rent to stay in your home.
- Offer to pay your delinquent mortgage by purchasing your home.
- Promise that you can repurchase your home when your financial situation improves.
Many years ago I took out a second mortgage on my home. The house had grown in value and had at least $30,000 of equity. At that time, I had multiple reasons. The second mortgage added a second monthly payment to my already very tight budget. I made both the original payment and the second mortgage payment for a couple years until I was able to refinance both loans into a ten-year fixed interest rate loan. Fortunately, I was able to pay off the ten-year loan in about six years.
Let me hasten to say I would never want to do a second mortgage on my house again. Looking back, it was a bad financial decision. This type of loan is an option if you are in dire straits. At the time, I thought It was something I needed to do and it worked out.
My bank did ask what I wanted the money for and I told them my numerous reasons. Essentially, they didn’t care. They only cared that I had the financial ability to pay it back. They cared if my property was valuable enough to cover their costs if I defaulted on my loan. They wanted to verify my income, any other loans, and review my previous three years of income tax reports.
After the deal was made, I didn’t hear anything from the Attorney General or any federal judges about my loan from the bank. No one hounded me about my interest rate or the fixed number of years I would pay back the loan. The arrangement was made between my lending institution and me. It wasn’t anyone else’s business.
Let’s say I determine my house today is worth a million dollars. It’s not, but I can say it is based on what it means to me.
Anyone can value their property for whatever they think it’s worth. Let’s say I go to the bank and want to borrow $600,000 against my one-million-dollar house. At this point the bank has to begin their process of determination. They will do an appraisal of my house. They will then look at my income and any other assets. They will determine if they think the loan is in their favor to make.
If in reality my house is only worth $400,000 then they may say we can’t loan you the $600,000 but we can loan you $200,000. It then becomes the decision of the lender as to how they want to proceed with the loan and how much they want to loan. If I falsify my financial records in order to get the loan then that becomes problematic. If the lender does a good job in verifying the value of the property, there shouldn’t be a problem.
If the lender for some unlikely reason determines to loan me the $600,000 because I’m a good customer and they like me, then the deal is between the lender and me. Can you imagine a judge or Attorney General saying they don’t like your loan arrangement?
Are the lending institutions after Donald Trump? No. If they think he has done something bad or they aren’t receiving their money they will go after him. The most recent national courtroom scene in NYC is another political sham.
