Loans and mortgages

Credit, Debt, & Lending

Topics covered

Advance-fee loan scams

With the rapid development of technology, our society is moving closer and closer to a paperless economy. This makes personal credit more important in our daily lives. Unfortunately, maintaining good credit can be difficult.

Worse yet, scam artists have found a way to reach out to those particularly vulnerable consumers, such as those with credit problems or no credit history at all, the unemployed, and even those consumers in emergencies who have an immediate need for cash.

The scams — advance-fee loans -— usually “guarantee” or represent a “high likelihood of success” that they can arrange a loan or credit for a consumer, regardless of the consumer’s credit history.

The scams differ from legitimate credit offers in one important way — they require payments up front, before the lender is identified and the application is completed.

Keep in mind that advance-fee loan scams are oftentimes advertised in recognized media outlets — your local paper or radio station, or on cable TV spots. This, however, does not guarantee the legitimacy of the company or their offer.

If you have further questions about advance-fee loans or other credit offers, please contact our office at 1-800-771-7755 read more on this website.

Don’t pay for a promise. It’s illegal for companies doing business by phone to promise you a loan and ask you to pay for it before they deliver.

Advance fees for a loan are illegal. Ignore any offer that guarantees you a loan for a fee paid in advance. Legitimate lenders never guarantee or say that you will receive a loan before you apply, especially if you have a damaged credit history or no credit record at all.

Watch those fees! State law limits the total fee a loan broker can assess (after loan approval) to 0.5% of a non-mortgage loan. If anyone tries to charge you more, report it to our office.

Never provide your credit card, bank account numbers, or Social Security number, whether over the telephone, by e-mail, or any other means, unless you are familiar with the company and know why the information is necessary.

If you don’t have the offer in hand — or confirmed in writing — and you are asked to pay, don’t do it! It is fraud and it is illegal!

If you have credit or debt problems or concerns about your personal finances, you may want to contact your local nonprofit credit-counseling agency for assistance. Contact the National Foundation for Consumer Credit at 1-800-388-2227 or nfcc.org.

If you are looking for help to pay off debts, be sure to confirm that your nonprofit credit counselor is licensed to provide budget planning services in New York by visiting dfs.ny.gov.

If you believe you are a victim of an advance-fee loan shark, contact the Office of the New York State Attorney General at 1-800-771-7755 to report the company.

This consumer alert was developed with the assistance of the Federal Trade Commission (FTC) as part of a joint federal and state effort to educate and protect consumers against the growing number of credit schemes. You can contact the FTC at 1-877-FTC-HELP (1-877-382-4357).

Help for homeowners

If you are having difficulty making your mortgage payments or are in foreclosure, you’re not alone, and you can get help. Here are some important steps you can take to protect yourself.

Contact your lender or loan servicer

If you are at risk of foreclosure, contact your lender or loan servicer immediately. They can help you explore possible solutions to protect yourself and your family. Visit the federal government's website for a list of servicers and their contact information.

Contact a housing counselor

A not-for-profit housing counselor may be able to help you negotiate a solution or find local legal services. A counselor may be able to provide much-needed assistance at little or no cost. Find a housing counselor in your area.

You can also contact New York’s Homeowner Protection Program (HOPP), which connects New Yorkers with housing counselors and legal services at no cost. Call the HOPP hotline at 1-855-466-3456 or visit homeownerhelpny.com.

If you live in New York City, you may also get help by contacting the Center for New York City Neighborhoods (CNYCN) at 646-786-0888 or by calling 311. CNYCN coordinates foreclosure prevention and intervention services in New York City.

If you are a homeowner, you can also contact the national Hope NOW Hotline for assistance at 1-888-995-HOPE (4673).

Seek legal assistance

If you are facing foreclosure and need immediate legal assistance, call the New York State Bar Association’s Lawyer Referral Program at 1-800-342-3661 or visit their referral website to locate an attorney in your area. If you cannot afford a lawyer and are looking for free legal services providers in your area, visit the Law Help website.

Homeowners and those who have lost their homes to foreclosure should be wary of any unsolicited calls concerning mortgages or housing, especially if the caller asks for any personal information. Offers to speed settlement assistance for a fee are fraudulent. Neither banks nor housing-counseling agencies approved by the U.S. Department of Housing and Urban Development (HUD) will charge a fee for settlement assistance.

To protect yourself from being scammed:

Be skeptical of online ads or telephone solicitations that promise they can get you a mortgage modification or save your home from foreclosure. Only your bank or loan servicer can approve a loan modification.

Do not give a caller your personal financial information, such as your bank account number, Social Security number, or the name of your loan servicer. Your bank will already have this information.

Never pay an up-front fee for mortgage-related services. It is a violation of New York law to charge upfront fees for such services. Report violations to the Attorney General at 1-800-771-7755.

File a complaint if you have been scammed by a foreclosure-rescue operator or debt-relief organization

Predatory lending

"Predatory lending" means certain unfair and deceptive practices used by unscrupulous merchants in mortgage lending and consumer finance.

These merchants frequently target low-income, minority, and elderly consumers, who they believe have poor credit or little access to traditional lines of credit. They pressure their targets into accepting high-cost loans, often secured by a mortgage on their home, which provide them little or no financial benefit.

If you have been victimized by these practices, you may be entitled to relief under state and federal law. Our office investigates allegations of predatory lending practices. If appropriate, we will begin litigation to enforce compliance with the law.

In addition, our office has developed the following tips to help you avoid being victimized by predatory lending practices. If you believe you have already been defrauded by an unethical lender, please contact our office at 1-800-771-7755.

How to protect yourself and your finances

Be wary of loans offered through door-to-door sales or telemarketing solicitations.
Watch out for offers made by construction companies to procure access to high-cost loans in conjunction with construction services.
Be wary of lenders or brokers who guarantee loan approval regardless of your credit history or rating.
Shop around! Interest rates and fees vary widely. Don’t assume you will not qualify for a loan from a traditional lender. Those loans may be less expensive than “subprime” loans.
Be suspicious of anyone who pressures you to act before you are ready.
Read the entire loan application carefully before signing. Make sure there are no blank spaces.
Make sure that you have received, read, and understood all required disclosure documents before you close. At closing, make sure the loan terms have not changed from what you were told before and that you do not see any unexpected fees.
Consult an attorney before signing anything!
Ask about fees and points before applying for a loan. The interest rate is not the only important term of a loan!
If you are considering a loan with a variable interest rate, make sure you understand what conditions will affect a change in your rate, and the amount by which your rate may fluctuate.
Watch out for hidden terms, such as prepayment penalties and balloon payments.
Make sure you can really afford the monthly payments. As a general rule, financial experts typically recommend that mortgage payments should be no more than 28% of your gross monthly income. Contact a nonprofit credit-counseling agency for assistance in determining whether you can afford your loan.
Make sure the lender and broker you are dealing with are licensed by the New York State Department of Financial Services (DFS). Contact DFS at 1-800-342-3736.

Common predatory lending practices:

Equity stripping: The lender makes a loan based on the equity in the consumer’s home, regardless of whether the consumer has the ability to make payments. If unable to make payments, the consumer can lose the home through a foreclosure proceeding.
Loan flipping: A consumer is having difficulty making payments on a current loan. The lender refinances the existing loan with a new long-term, high-cost loan. Each time the lender “flips” the existing loan in this way, the homeowner must pay points and assorted fees.
Packing: The lender provides a loan that contains charges for services the consumer does not request or need. The consumer is often forced to buy credit insurance.
Hiding the balloon: The lender seems to provide a low-rate loan requiring low monthly payments. At closing, the consumer learns that the loan is a short-term balloon loan that will have to be refinanced within a few years.
Discrimination: The lender charges a minority consumer more than they would charge a comparable nonminority consumer.