Safe and Sensible: Michigan Debt Consolidation

By AJ Fanter
Local Lender Columnist
May 2, 2006
Michigan home owners looking to use their home's equity to obtain a debt consolidation loan should take care when selecting a mortgage lender. That's because Michigan has one of the fastest growing mortgage fraud problems in the country.

In fact, according to an article in the Detroit Free Press, FBI statistics show mortgage fraud losses in the state of Michigan increased from roughly $9 million in 2003 to $26 million in 2005.

Equity Skimming and Debt Consolidation

Homeowners looking to use their home's equity for debt consolidation can become victims of equity skimming. This is a scheme where an investor uses an independent buyer, along with fake income documents and a false credit report, to obtain a mortgage in the homeowner's name. The homeowners sign over the title, thinking they can rent it and buy it back. Instead, the buyer collects rent but never makes the mortgage payments until the bank forecloses. The buyer receives the equity from the initial loan but the homeowner is left with nothing.

Safe Debt Consolidation

Here are some tips from to help you avoid mortgage fraud:

• Beware of lenders who tell you they're your only chance of getting a loan or owning a home.
• Beware of e-mails promoting the elimination of mortgage loans, credit card and other debts while requesting an up-front fee to prepare documents to satisfy the debt.
• Never sign a contract under pressure. Don't sign anything you don't understand and never sign any paperwork that has blank lines or spaces.
• Make sure the name on your application matches the name on your identification.
• Don't pay mortgage payments to anyone but your lender.
• Check the licenses of real estate and mortgage industry professionals with state or city agencies.
• Shop for a lender and compare costs online or by phone.

If you're considering a debt consolidation loan to pay off credit cards or other loans, here's the best tip of all - if a deal sounds too good to be true, it probably is.

Sources:
Detroit Free Press, April 15, 2006, Stealing Homes
FBI, Financial Crimes Report to the Public, May 2005

About the Author
AJ Fanter is a freelance writer based in Reno, NV.