Mortgage fraud still thrives among contractors

Home repairs offered inexpensively often turn into mortgage fraud

The problem of mortgage fraud and equity theft is rampant throughout the United States, as we have reported in numerous other articles. The crime is relatively easy to pursue, highly profitable and at the moment, relatively free of prosecution. Many of the people who participate in this crime are likely to get away with it, and if they do so they are likely to do it again.

One of the oldest forms of mortgage fraud is the theft of home equity through home repairs. The deals can vary, but inevitably involve a contractor who offers to do work on the victim’s home for a fair price. The old standbys are roof work and aluminum siding replacement, but the work could extend to home remodeling, garage conversion, or the pouring of a driveway. The contractor usually solicits work through door to door canvassing of a neighborhood. They offer to do the work and when the victim points out that he or she cannot afford the repairs, the contractor offers to arrange financing.

This, unfortunately, is where things go wrong. Some of the problems that can result from this sort of deal are:

• Bad loan terms - The “financing” turns out to be a home equity loan with high interest rates and fees. The owner ends up paying much more money in interest than he or she would have paid if obtaining a loan through a traditional lender.
• Bad repairs - The contractor doesn’t actually do the work; he subcontracts the work to someone else and pockets the difference. The subcontractor often does a poor job on the construction or perhaps fails to complete the work at all. This may happen in addition to the poor home equity loan arranged through the contractor.
• Deed theft - Instead of a home equity loan, the documents provide for the contractor to simply become the owner of the property. These cases of deed theft are less common than those involving poor financing, but they do happen. The end result is that the victims find themselves without a house.

These problems can be easily avoided by consumers with a little bit of common sense. If you need to have some home repairs done, consult with a legitimate contractor. You should find them; don’t let them find you. When it comes to financing, you should seek out a loan yourself. If the contractor says that they can arrange financing, you can decline or you can meet with the lender that they recommend separately. Let the contractor do the building; you can take care of finding your own financing. You should also check for references for the contractor. Talk to other people who have had work done by this company. Find out if they are happy with the work and if they would have the contractor do work on their home again.

Any financing involving your home should probably involve an attorney. It will not cost that much to have a competent attorney look over the paperwork to make sure that it is written in a way that serves your best interest. The last thing you want is to lose your house.