How Predatory Loans Work
Similar to equity skimming, predatory loans can take many shapes, but in general, a common thread is a person or company offering what sounds like free or “easy” money to a home owner. As a consumer, be aware that if a deal seems too good to be true, it probably is too good to be true.
Generally, an unscrupulous investor or real estate professional reaches out to at-risk homeowners offering a nominal amount of money for the right to list a property for sale at some time in the future. The next steps may vary from scenario to scenario, but usually include the investor or real estate professional filing a lien, mortgage or encumbrance on the property with which they can enforce the agreement at a later time. As a consumer, you must always be careful about what you sign during any real estate transaction and if you are ever in doubt, contact a lawyer or other resource for more information.
How to Spot Predatory Loans
- You may be offered money now for the right to list your property in the future.
- You may be asked to sign a power of attorney or sign over the deed of the home.
How you can protect yourself
If you are behind on your mortgage payments, contact the Colorado Foreclosure Hotline and talk with a foreclosure counselor at: 1-877-601-HOPE (4673).
Always deal with a reputable person and check them out, including any references. Do not rush into transferring over the title or entering into any agreement without discussing the legal ramifications with an attorney.
Never sign a Power of Attorney to someone in these situations without the advice of an attorney. Doing so may result in the thief stealing more from you in addition to your home. As well, contact your lender to see what options are available if you are behind on your mortgage payments; and definitely discuss with your lender the ramifications of you transferring the title to your home while there is still a mortgage in place.