Your Mortgage : Loan Payment Switch Scam Targets the Unwary

Loan-servicing scams continue to spread across the nation, despite a variety of consumer-education campaigns being run by lenders and a handful of trade groups.

The scams have recently surfaced in several Southern states, including Virginia and North Carolina. Homeowners in California, Colorado, Washington, D.C. and several other areas have previously complained about being swindled.

In a typical loan-servicing scam, you--the homeowner--get an official-looking letter from a company that says it has recently bought your loan from the original lender. Or, the letter states that the company is taking over the duties of processing your monthly payments.

The letter also instructs you to begin sending your payments to the new company immediately, and might even include a book of loan-payment coupons.

If you start sending the new company checks without first verifying the letter’s authenticity, you might lose hundreds or even thousands of dollars before you figure out that you’ve been duped.

Equally bad, you’ll also be responsible for making back payments to your rightful lender and may put black marks on your credit record that can be hard to erase.

“Loans get bought and sold all the time, so a lot of people just start sending checks to the new address,” said Warren Lasko, executive vice president of the Mortgage Bankers Assn.

“If you get one of these letters, play it safe and check the new company out first. A little legwork now might save you lots of money and aggravation later.”

If you get a notice saying that your loan is being transferred, Lasko said, following these guidelines can help you avoid being ripped-off:

* Get a “goodby letter” from the original lender or loan-servicer confirming that your loan is being transferred to another institution. It should state the name of the new company, its address, and the name and phone number of a contact person or department.

The letter should also specify where and when the next payment should be sent.

* Obtain a “welcome letter” from the new lender or servicing company. It should have the same information as the goodby letter.

* Make sure that both the original lender and new loan-servicer have your current address to ensure that you’ll get any correspondence in a timely matter. Double-check your loan’s account number to be sure it’s accurate.

* Scrutinize the first few monthly statements you get from the new lender to make sure it’s properly crediting your account for each payment you make.

* Also make sure that you’re being properly credited for any payments you make into impound or reserve accounts for taxes, insurance and the like.

The Department of Veterans Affairs last week lowered the maximum interest rate for federally backed VA home loans to 9% from 9 1/2%.

Under the new rate, payments on the typical VA loan of $80,000 would be about $643--or $29 less than payments under the old, higher rate.

In California and most other parts of the country, qualified veterans can borrow up to $184,000 under the VA program without making a down payment. The money can also be used to renovate or refinance an existing house or manufactured home.

Although many veterans don’t realize it, they can often get a VA loan even if they’ve used the program before.

If you’re a veteran, there are two basic requirements that you must meet to “re-use” the VA: Your previous VA loan must be paid in full, and you can no longer own the property that you originally financed.

It’s important to note that these two rules don’t automatically eliminate you if you want to sell your current VA-financed home and get a new house with a new VA loan.

Instead, the lender who’s making the new loan would simply issue loan approval contingent on proof that you’ve sold your current house and paid off your mortgage--two actions that usually occur on the day that escrow closes on the sale of your old home.

The new lender then presents proof to the VA that the old loan has been paid in full, and is given permission to make the new VA loan.

Since it can take a few more days to get the VA’s final approval, many veterans work out a deal to rent their old home back from the new owners until the new loan is actually funded.

Average Rates for Residential Mortgages

Average rates for residential mortgages as of Aug. 9, 1991.

Survey Conventional Mortgages Adjustable Mortgages Area 15 Year 30 Year Composite 1 Year Composite National 9.10% 9.40% 9.26% 7.11% 7.46% California 9.30 9.56 9.44 7.37 7.42 Connecticut 9.10 9.44 9.30 7.03 7.28 Wash. D.C. 9.02 9.32 9.18 6.88 7.33 Florida 9.12 9.44 9.29 7.16 7.44 Mass. 9.01 9.30 9.16 6.97 7.50 New Jersey 9.08 9.37 9.24 7.15 7.64 N.Y. Metro 9.13 9.43 9.30 7.16 7.55 New York 9.18 9.48 9.35 7.21 7.55 N.Y. Co-ops 9.24 9.63 9.53 7.61 8.09 Pa. 8.81 9.16 8.99 7.00 7.26 Texas 9.04 9.32 9.18 6.99 7.24

SOURCE: HSH Associates, Butler, N.J.