FTC Offers Important Loan Information

Not all loans or lenders are created equal. Some unscrupulous lenders may offer loans to elderly or low-income homeowners and those with credit problems, promising that the loan will be based on the equity of the home, rather than the homeowner's ability to repay it. A revised consumer alert from the Federal Trade Commission, "Need a Loan? Think Twice About Using Your Home as Collateral," warns that although refinancing, a second mortgage, or a home equity loan may seem like the answer for consumers needing money for bills or home improvements, an inability to make the required payments may cause them to lose their homes, as well as the equity they've built up.

The alert urges consumers to consult with an attorney or financial advisor before making any loan decisions. It also provides the following helpful tips for consumers who are seeking a loan:

• Avoid any lender who tells you to falsify information on the loan application.
• Shop around and compare: the annual percentage rate (APR), points and fees, the term of the loan, the monthly payment, and any balloon payments or prepayment penalties.
• Be sure you understand all the documents you will be required to sign.
• At closing, be sure the monthly payments, dollar amounts, and interest rates are the same as those you initially agreed to. Be sure to get a copy of all documents you've signed.
• If you have second thoughts about your loan, the Truth in Lending Act gives most home equity borrowers at least three business days after closing to cancel the deal.
• The Home Ownership and Equity Protection Act (HOEPA) may give you additional rights if your loan is a home equity loan, second mortgage, or refinance secured by your principal residence.

If you think your lender has violated the law or you want information about a right to rescind, contact a private attorney, your state's Attorney General or banking regulatory agency, or the FTC. For more valuable tips and information on HOEPA, view the revised consumer alert at www.ftc.gov/bcp/conline/pubs/alerts/hoepalrt.htm.

To obtain additional consumer information or copies of this publication, visit http://www.ftc.gov/bcp/menu-media.htm. The FTC works for the consumer to prevent fraudulent, deceptive, and unfair business practices in the marketplace and to provide information to help consumers spot, stop, and avoid them. To file a complaint or to get free information on consumer issues, visit http://www.ftc.gov or call toll-free, 1-877-FTC-HELP (1-877-382-4357); TTY 1-866-653-4261. The FTC enters Internet, telemarketing, identity theft, and other fraud-related complaints into Consumer Sentinel, a secure, online database available to hundreds of civil and criminal law enforcement agencies in the U.S. and abroad.