Steps to avoid loan fraud?

bfreeman · Joined: 06 Aug 2005 Posts: 15

i just came across this article that shows how to avoid loan fraud in 10 different ways.

however one point i didn't get was "Do NOT refinance if you do not need to. "

what does it mean by refinancing?

m2c · Joined: 03 Aug 2005 Posts: 762

The paragraph refers to mortgages on properties borrower already owns. Technically you should add “at the time of execution” since purchase money mortgages are not filed until after title is transferred.

Strange site – broad brush strokes without much detail. Grain of truth in either point. A UK site despite the “com” so perhaps pertains to problems more prevalent there.

Haplo · Joined: 20 Jan 2005 Posts: 2406 Location: Springfield, IL

I don't have the site to check, but in general it's likely trying to let you know not to be suckered into refinancing unless you need to. That means that you're receiving a benefit for the transaction. Lower rates, lower payments, shorter terms, debt consolidation, etc are all reasons that you might want to refinance your property. Don't do it just because someone called you up and said they can refinance your home from a 6% to a 9%, 30 year fixed to a 2 year Adjustable, but hey, you can go buy that new car you always wanted.

m2c · Joined: 03 Aug 2005 Posts: 762

Haplo’s mention of a car brings up a good analogy with which most people are familiar. If you’re buying an automobile and the salesman puts 90% of the emphasis on payment rather than price, you can count on there being a lot of fat in the deal.

Same thing with refinances. Difference in monthly payment will typically be called “savings”, risk differentials ignored, and differing loan terms (# of payment months) compared.

I suspect in the UK you don’t have something similar to a Trust-in-Lending form. As much as some LOs bemoan TIL, it does provide a specific vehicle to explicitly review such items as prepayment penalties, payment flow, etc. Occasionally applicants for whatever reason want out of a deal and come up with various reasons to blame the LO. TIL does provide some cover. It does NOT get around the mismatched term issue. Always ask the LO what the payment on the new loan would be if you wanted to maintain the same remaining number of months as with your current loan. Caveat: if you’ve made additional principal payments, have the LO calculate the actual remaining term on your current loan, not the loan term based on recorded final payment date.

You do have a no-fault, get-out-of-jail free card (with all the money you’ve spent so far in the application) in the US for refinance as long as you time your withdrawal correctly. May not be similar protection in the UK.