Hawaii State Center Wiki: How To Avoid Hawaii Home Equity Scams

Avoiding Hawaii Home Equity Scams

You could lose your Hawaii home and your money if you borrow from unscrupulous Hawaii lenders who offer you a high-cost loan based on the equity you have in your Hawaii home or condo. Certain lenders target Hawaii homeowners who are elderly or who have low incomes or credit problems. They then try to take advantage of them by using deceptive practices. The Federal Trade Commission cautions all Hawaii homeowners to be on the lookout for for these tricks:

Equity Stripping: The lender gives you a loan, based on the equity in your Hawaii home, not on your ability to repay based on your income. If you can't make the payments, you could end up losing your Hawaii home.
Loan Flipping: This is where a lender encourages you to repeatedly refinance the loan. Often the lender tries to talk you into borrowing more money. Each time you refinance, you pay additional fees and interest points. That only serves to increase your debt.
Credit Insurance Packing: The lender adds credit insurance to your Hawaii home loan, which you may not need.
Bait and Switch: The lender offers one set of loan terms when you apply, then pressures you to accept higher charges when you sign to complete the transaction for a Hawaii home loan.
Deceptive Loan Servicing: The Hawaii loan lender doesn't provide you with accurate or complete account statements and payoff figures. That makes it almost impossible for you to determine how much you have paid or how much you owe. You may pay more than you owe.

Some of these practices violate federal credit laws and Hawaii consumer protections laws dealing with disclosures about loan terms, discrimination based on age, gender, marital status, race, or national origin; and debt collection.

You will likely have additional rights under Hawaii state law that would allow you to bring a law suit in Hawaii against the lender.

The Federal Trade Commission suggests if you're thinking about using your Hawaii home as collateral for a loan, be careful. Unless you can make the loan payments out of current income, you could lose your home as well as the equity you've already built up. Some additional tips to remember:

Eventhough Hawaii real estate is expensive, and in many places as enjoyed significant increases in value, the lure of extra money or the chance to reduce monthly credit payments can be very costly in the long run. High interest rates and other credit costs could get you in over your head.
Credit insurance may not be a good deal from a lender. If you want the added security of credit insurance, shop around.
Don't sign a Hawaii loan agreement if the terms are not what you were given when you applied.
Ask for an explanation of any dollar amount, term, or condition that you don't understand. Federal law, as well as Hawaii law, is very clear about what credit and loan term information must be provided in writing when you apply for a Hawaii loan and before you sign any agreement in Hawaii. Considering asking a Hawaii Attorney to review the loan document.

In addition, shop around for the best loan terms and interest rates. Contact lending institutions, such as banks and credit unions, and consult a legal or financial advisor, or someone you can trust before you make any loan decisions. Or contact your local Fair Housing Office, legal aid, or senior services organization for information and help.

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