Borrowers: beware exploitive lending

A lot of people are putting their biggest asset their home on the line to obtain financing through home-equity loans.

However, the Federal Trade Commission warns that certain abusive or exploitive lenders are targeting homeowners who are elderly, members of minority groups, have low incomes or have bad credit.

The FTC has issued a Facts for Consumers brochure titled "Home Equity Loans: Borrowers Beware!" that outlines common abusive or exploitive lending practices in the home-equity market and how to avoid them.

A list of do's and don'ts offers guidance to consumers for protecting themselves against such practices as equity stripping, hidden loan terms, loan flipping, packaging loans with unwanted services and mortgage servicing abuses.

The FTC recommends:

?Do ask specifically if credit insurance is required as a condition of the loan. If it isn't and a charge is included in your loan, and you don't want the insurance, ask that the charge be removed from the loan documents. If you want the added security of credit insurance, shop around for the best rates.

?Do keep careful records of what you have paid, including billing statements and canceled checks. Challenge any charge you think is inaccurate.

?Do check contractors' references when it is time to have work done in your home. Get more than one estimate.

?Do read all items carefully. If you need an explanation of any terms or conditions, talk to someone you can trust, such as a knowledgeable family member or an attorney. Consider all the costs of financing before you agree to a loan.

Likewise, the FTC warns:

?Don't agree to a home equity loan if you don't have enough income to make the monthly payments.

?Don't sign any document you haven't read or any document that has blank spaces to be filled in after you sign.

?Don't let anyone pressure you into signing any document.

?Don't agree to a loan that includes credit insurance or extra products you don't want.

?Don't let the promise of extra cash or lower monthly payments get in the way of your good judgment about whether the cost you will pay for the loan is really worth it.

?Don't deed your property to anyone. First consult an attorney, a knowledgeable family member or someone else you trust.

For more information on home-equity loans or to receive a list of FTC publications on a variety of consumer credit concerns, contact the agency at Consumer Response Center, Federal Trade Commission, Washington, D.C. 20580; by calling 202-FTC-HELP; or online at www.ftc.gov.

INSET CAPTION:

Abusive lenders are targeting homeowners who are elderly, members of minority groups, have low incomes or bad credit. [[In-content Ad]]