Financial services are growing and expanding, and that's generally good news
for the consumer. At the same time, unscrupulous people are coming out of the
woodwork trying to take advantage of the system, and that includes mortgage
services. Two of the most vulnerable areas to watch are reverse mortgages and
selling of mortgage loans. Be on your guard when applying for a reverse
mortgage, or when you receive notice that your existing mortgage has been sold
or "transferred" to a new loan provider.
Reverse mortgages are expected to boom over the next five years, particularly
among seniors. According to Fannie Mae, the big secondary mortgage company,
over a million seniors could take advantage of this relatively uncommon loan,
which actually involves getting money back from your loan provider to use
however you choose. Fannie Mae wants consumers to understand what they are
getting into, especially to know how to recognize pressure sales tactics.
Those payments may seem very tempting but don't let anyone fast-talk you into
a reverse mortgage, not even friends or relatives. Make sure that payments
are made out directly to you--don't sign the money over to anyone else.
Remember that it's totally up to you how you spend the money. Just because
you heard about a reverse mortgage program from a remodeling company or
someone trying to sell investment products, doesn't mean you have to purchase
Fannie Mae's free brochure on Reverse Mortgages is available by calling
(800) 732-6643. In addition, the National Center for Home Equity Conversion
runs a web site with consumer information, including calculators that tell you
how much money would be available to you under a reverse mortgage. The
address is www.reverse.org.
Selling of Mortgage Loans
Although it comes as a surprise, it's not unusual for your existing mortgage
loan to be transferred or sold to a different lender. Most loans are sold in
the secondary mortgage market to Fannie Mae or Freddie Mac, the largest
purchasers. When the new mortgage servicing company acquires your loan
(without changing your loan terms) they must notify you about it.
Nonetheless, you should carefully scrutinize any notice claiming that your
mortgage loan has been changed to a different provider. Unfortunately,
fraudulent operations have sprung up around the country that send bogus
letters telling homeowners that their loan has been purchased and to send
payments to such and such company. You guessed it--no such transaction was
ever made in these cases. Some unscrupulous individual defrauds homeowners
for a couple of months then sneaks off to a different part of the country.
Congress under RESPA (1990 Real Estate Settlement Procedures Act) required
certain safeguards for homeowners. When a lender transfers, assigns, or sells
a mortgage loan, the existing lender and new lender must disclose the date of
the transfer, the name, address, and telephone number of the new lender, and
the appropriate contacts for both the old and new lender offices. The
transfer cannot affect the terms of the loan or servicing provisions. Federal
law also requires a 60-day grace period during which payments cannot be
considered late nor penalties assessed for payments that are misdirected.