Fraud and Deception Lead to Turmoil for Homeowners
The sharp rise of foreclosures disturbs analysts who study the overall housing market in the United States. Because so many adjustable-rate mortgages with weak underwriting were issued in 2005 and 2006, thousands around the country are now defaulting on their loans.
The U.S. Federal Trade Commission is advising people that many advertisements for home mortgages are simply deceptive and might be in violation of the law: ads for amazingly low interest rates and payments, that don’t disclose all the important terms and lead to surprises when the loan’s initial period ends. The FTC previously sent warning letters to many mortgage brokers and lenders about deceptive ads.
Many regulators and lawmakers opine that the federal government should oversee independent mortgage brokers and lenders. The deceptive advertisements often violate the Truth in Lending Act, says the Federal Trade Commission, which enforces the consumer protection law.
The FTC has brought 21 enforcement actions against companies in the mortgage lending industry over the past decade, focusing mainly on the subprime market.
Once the unwary borrower has been roped into a mortgage with adjustable rates, the situation gets precarious. The payments become too high and the homeowner falls behind, meaning he might lose the home if the right steps aren’t taken quickly.
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