Using common sense when you buy will keep your home from plunging ‘under water’

CONSUMER FORUM

By Russ Van Arsdale, executive director Northeast CONTACT
Posted March 09, 2014, at 8:50 a.m.

We’ve all heard the ads urging us to buy, since “interest rates are near historically low levels.” With spring approaching (at least on the calendar) and those low rates expected to hold for a while, many renters are thinking about buying a home.

Many may think twice, wondering if all those horror stories about houses going “under water,” or costing more than they’re worth, might come back to bite them. Those with second thoughts might want to spend some time with a new publication from the Maine Bureau of Consumer Credit Protection.

It’s called The Downeaster Common Sense Guide to Finding, Buying and Keeping Your Maine Home. The 32-page guide was written by the bureau’s principal examiner, David Leach, and senior consumer credit examiner, Edward Myslik.

It starts in exactly the right place: asking if you should buy a home or continue to rent. Once you’ve determined that your best bet is to buy, the real work begins.

The best piece of advice in the guide is not to buy more home than you can afford. You figure affordability through a debt-to-income ratio. The “front-end ratio” is figured by dividing the monthly mortgage payment (principal, interest, taxes and insurance) by the borrower’s total monthly income. The ratio should not be more than 28 percent.

What’s termed the “back-end ratio” is a measure of income against the mortgage cost plus the cost of all other loans.

The guide cautions against allowing this ratio to go higher than 43 percent.

New federal lending rules are aimed at ensuring that borrowers will be able to make payments on schedule; those rules make it unlikely that a loan will be approved if the back-end ratio exceeds 43 percent.

Once you’ve ordered an up-to-date credit report ( www.AnnualCreditReport.com, 877-322-8228) you’ll have an idea what your credit score will be. The score is not part of the report; it’s a number generated by Fair Issue Corporation, also known as FICO.

The scores provided to each of the three credit reporting bureaus may be different, and lenders will use the lowest number when offering an annual percentage rate, also known as APR, on a loan.

When shopping for a mortgage, you need to decide between conventional loans and Federal Housing Authority, also known as FHA, backed loans. Under the latter type, the FHA provides a guarantee to investors should a borrower default. The guide advises that, while FHA loans are priced about the same as conventional loans, the mortgage insurance costs more (meaning higher APRs).

The guide has lots of nuts-and-bolts info on shopping for mortgages. Note rate vs. APR, mortgage points, disclosure, home inspections and other concerns are all covered. The authors also caution against falling for three advance payments that guarantee a low APR. Advance fee loans are always scams and are illegal in the U.S. and Canada.

Read the guide online at www.Credit.Maine.gov and go to “Consumer Guides.”

Maine residents can also request a free printed copy by calling 800-332-8529. For a real estate professional’s take on home mortgages, visit www.realtor.com/home-finance/mortgages/how-to-get-best-interest-rate.aspx?source=web.

Consumer Forum is a collaboration of the Bangor Daily News and Northeast CONTACT, Maine’s all-volunteer, nonprofit consumer organization. For assistance with consumer-related issues, including consumer fraud and identity theft, or for information, write Consumer Forum, P.O. Box 486, Brewer 04412, visit https://necontact.wordpress.com or email contacexdir@live.com.

State’s Bureau of Consumer Credit Protection Issues Comprehensive Home Mortgage Guide

GARDINER — Maine’s Bureau of Consumer Credit Protection, an agency within the Department of Professional and Financial Regulation, announces the release of a new, comprehensive mortgage guide, titled The Downeaster Common Sense Guide to Finding, Buying and Keeping Your Maine Home. Free to Maine residents, this 32-page booklet provides information for those contemplating the purchase and financing of a home. Covered topics include:

• How to evaluate whether renting or buying makes the most sense, given income and future plans;

• How to use current income, debt load and credit reports to predict if a loan may be approved;
• How to select a mortgage lender or loan broker;
• How to choose the type of loan product that best fits your needs; and
• Understanding your obligations after the loan closes

Governor Paul R. LePage commented on the timeliness of the guide and the information it offers. “With interest rates near historically low levels and the Maine economy improving, this is an excellent time to purchase a home,” Governor LePage said.  “But it’s important to know if you’re in a good position to make a significant purchase of this kind and to fully understand the home-buying process.  This new booklet provides thorough, step-by-step guidance.”

“This publication will help Maine residents to become better-informed mortgage borrowers,” David Leach, principal examiner with the Bureau and one of the booklet’s co-authors, said. “One thing we’ve learned from assisting hundreds of homeowners avoid foreclosure is that some did not know the right questions to ask when they were deciding to get a mortgage.”

An online copy can be found at www.Credit.Maine.gov by clicking “Publications” or “Consumer Guides” (directly at www.maine.gov/pfr/consumercredit/documents/MortgageGuide_RevisedOnline.pdf). Printed copies are available free of charge by calling the Bureau at 1-800-332-8529 (toll-free in Maine).

“With federal regulators setting tougher borrowing standards this year for so-called ‘qualified mortgages’ (QMs), it’s more important than ever that potential borrowers understand how lenders calculate debt-to-income ratios,” Edward Myslik, Bureau senior consumer credit examiner and co-author of the guide, said. “This booklet demystifies the process. Understanding how current debt loads factor into lenders’ decisions will help consumers make prudent decisions, such as avoiding taking on additional financial obligations if they plan to apply for a mortgage.”

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The Bureau of Consumer Credit Protection, which is part of the Maine Department of Professional and Financial Regulation, was established in 1975 to administer the state’s consumer financial services laws.  The agency investigates consumer complaints, conducts compliance examinations, licenses companies that offer financial products to Maine residents, and performs outreach to advise consumers and creditors of their legal rights and responsibilities.

 

Reverse Mortgage Consideration – WABI-TV

Video of interview featured January 7th WABI-5 Morning News

This morning, Russ Van Arsdale with Northeast Contact discussed reverse mortgages also known as a home equity conversion mortgage.

It’s a financing arrangement for people 62 and older who own their homes outright or have a small mortgage. Instead of you making payments, a reverse mortgage allows you to receive money, based on the equity of your home.

Russ warned our viewers that the deal can be too good to be true.

He advises folks to log onto www.hud.gov and search for reverse mortgage.

Also, if you are approved for a reverse mortgage, you still need to pay for normal maintenance on the home, pay for property taxes and homeowners insurance, pay the mortgage insurance premium, and pay loan orientation and servicing fees and closing costs.

You’ll also probably pay a $125 feed for counseling with an organization approved by the U.S Department of Housing and Urban Development. That’s required to get a reverse mortgage, although the fee can be waived.

Maine’s Department of Professional and Financial Regulation Announces Cease and Desist Order Against “Woodhaven Advisors”

Bureau of Consumer Credit Protection says company is a predatory advance fee loan scam, falsely claiming to be located in Portland, Maine

GARDINER – Maine’s Bureau of Consumer Credit Protection issued a Cease and Desist Order against Woodhaven Advisors this week and warned consumers about this nationwide phony consumer loan company falsely claiming to be located on Forest Avenue in Portland.

A consumer in Oklahoma contacted the Bureau seeking licensing information about Woodhaven Advisors, which maintains a professional-looking website (www.woodhavenadvisors.com).  The company offered the consumer a $10,000 loan in exchange for four upfront monthly “collateral payments” of $200.38 totaling more than $800.

A Bureau investigation revealed that no lender by the name of Woodhaven Advisors is located at the Portland address listed on the site.  As a result of the investigation, the Bureau issued a formal Cease and Desist Order against Woodhaven Advisors on November 27, 2012 (www.WoodhavenAdvisors11_27_12.com).

“Woodhaven Advisors is not registered with the Bureau to make or broker consumer loans to Maine or out-of-state borrowers,” said David Leach, Principal Examiner with the Bureau. “The company is also not listed in corporate filings with the Secretary of State’s Office.  Additionally, the Portland City Clerk’s office confirmed that no such company is located at the address listed on the company’s website, nor is Woodhaven Advisors registered to do business in Portland.”

Leach sent an inquiry to the company’s “customer care” e-mail address.  The company responded on November 26, 2012 with profane language.

Advance fee consumer loans are illegal in Maine and the remainder of the United States.  Consumers who fall victim to advance fee loan scams pay the upfront money, but never receive the promised loan funds.  When consumers follow through with transactions of this kind from fraudulent lenders, they are often directed to wire advance fee funds, using services such as Western Union, Money Gram or Green Dot, to Canada or another foreign country.

“Once the money is wired or mailed to the scammers, there is little if any chance of recovering those funds,” Leach added.

The on-line application from Woodhaven Associates asks applicants to disclose their Social Security number, street address, and telephone and email contact information.  The disclosure of personal financial information such as Social Security numbers, dates of birth and bank account information can lead to a subsequent identity theft incident and additional losses of funds.

The Bureau notes that Maine has issued licenses to many reputable lenders and loan brokers, and advises consumers to never wire or mail advanced, certified funds to unknown consumer lenders or brokers. The Bureau recommends that consumers deal only with known, licensed lenders and brokers, and encourages consumers to call the Bureau (207-624-8527) to verify the license status of any company engaged in the consumer loan business. The Bureau also maintains a roster of licensed supervised lenders and loan brokers on its website, www.Credit.Maine.gov .

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The Bureau of Consumer Credit Protection is part of Maine’s Department of Professional and Financial Regulation, which encourages sound ethical business practices through high quality, impartial and efficient oversight of insurers, financial institutions, creditors, investment providers, and numerous professions and occupations.  Consumers can reach the Department at www.maine.gov/pfr.

Bureau of Consumer Credit Protection Issues Alert to Maine Consumers and Businesses

Loan Scams Increasingly Prevalent 

Latest Fraudulent Lenders Called “Hempford Finance Center” and “Metta Capital Funding” – Both Falsely Claiming to be Located in Portland

GARDINER – Maine’s Bureau of Consumer Credit Protection issued an alert Thursday to warn consumers and business about the increasing prevalence of ‘advance fee’ loan scams, and the frequency with which fraudulent companies falsely claim to be located in Maine.  The most recent examples involve “Hempford Finance Center” and “Metta Capital Funding,” both purporting to be based in Portland.

The Bureau’s investigation of Hempford Finance Center, which may also be operating as Hempford Funding Center,  found it operating much like other fraudulent loan companies.  In one case, a consumer applied online with Hempford for a $5,000 loan and received documentation outlining the terms and conditions of the loan.  The company wanted five up-front payments of $177.50 each, totaling $887.50, before the $5,000 loan would be made available.  The company asked for the payments to be wired from a local supermarket or department store.

“Hempford is not a licensed lender in Maine, and is not registered as a corporation authorized to operate in this State,” said David Leach, Principal Examiner with the Bureau.  “Additionally, the Portland Police Department confirmed that no business by the name of Hempford Funding or Hempford Finance Center exists at the Brighton Avenue address listed on the company’s loan documentation.”

A review of Metta Capital Funding also revealed standard procedures for advance fee loan scams.  In this case, the company lists a phony business address in Portland, but requires consumers to send money to a location in Canada.  With transactions of this kind, it’s typical for consumers to be directed to transmit funds to an alternative location—often thousands of miles from the company’s fake address.  Once the advance fee is sent to the perpetrators, there is little chance of recovering those funds.

The Bureau indicated that advance-fee loan scams appear to be on the rise, with an increasing number of fraudulent lenders claiming to be headquartered in Maine.  Other recent investigations by the Bureau involve entities called:

• North Lake Equity Group claiming to be located on Sanford Road in Wells.  Consumers from other states were told to transmit advance fees through the “Money Pack” system at WalMart.
• Crestridge Capital purported to be located in Belgrade.  In one case, a consumer was told to wire $770 in upfront payments for a $5,000 loan.
• Bellbrook Finance Center falsely claimed to be located in Belfast.  The Bureau believes this entity then changed its name to Millbrook Finance Center and provided a phony Biddeford address on its website.  This company promised loans of $5,000-$10,000 with about $1,000 in up-front money requested in the form of a wire (MoneyGram, Western Union, GreenDot).
• Ancaster Solutions purported to be based on Shoal Cove Road in West Bath.  The person living at the address was unaware of the company.

The Bureau notes that Maine has many reputable licensed lenders, and advises consumers and businesses to never wire or mail certified funds to unknown lenders.  The Bureau recommends that consumers deal only with known, licensed lenders, and encourages anyone with questions or concerns to call the Bureau toll-free at 1-800-332-8529 to verify the status of lenders or check the Bureau’s licensed supervised lenders at www.credit.maine.gov.  Out-of-state callers may dial 1-207-624-8527 for license verification.

The Bureau of Consumer Credit Protection is part of Maine’s Department of Professional and Financial Regulation.   The Bureau licenses lenders, creditors and collectors; conducts periodic examinations of creditors to determine compliance with state laws; and responds to consumer complaints and inquiries.

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Consumer Alert Issued: “BellBrook Finance Center” Is Loan Scam, Not Located in Belfast, Maine

 Thousands Taken from Family of Active-Duty, Deployed Service Member;

Calls Received from New York, Virginia, Oregon; Others Victims Possible

GARDINER – Maine’s Bureau of Consumer Credit Protection issued an alert Thursday to warn consumers about the prevalence of ‘advance fee’ consumer loan scams, and the frequency with which fraudulent companies claim to be located in Maine.  The most recent example involves “BellBrook Finance Center,” which purports to be located in Belfast.

BellBrook Finance Center solicited the family of a deployed active-duty service member from Virginia.  The company promised a $5,000 loan in exchange for advance payments via electronic payment, including $2,000 for insurance, $895 for a lenders’ fee, and $887.50 for five up-front monthly payments.  The money was paid through a money card company called Green Dot.  The loan was being sought to fund a trip for the service member’s wife to visit her deployed husband overseas.

“The prevalence of advance fee loan schemes is concerning,” said David Leach, Principal Examiner with the Bureau.  “BellBrook Finance Center is not licensed in Maine as a consumer lender, nor listed with corporate filings in the Secretary of State’s Office.”  Law enforcement officials in Belfast told Leach that no such company is located there, and that they have received other complaints about this scam.  A call to the company resulted in a “hang up” by an employee who refused to cooperate with the investigation.

“This case is among the most disturbing we’ve investigated in recent years, given the family’s circumstances, the planned use of the loan, and the excessive amount of up-front fees,” Leach added.  “BellBrook Finance Center preyed on a military family who could ill-afford to lose thousands of dollars.”

When consumers follow-through with transactions of this kind from bogus lenders, they’re often directed to transmit funds to an alternative location—often thousands of miles from the phony company address.   Once the advance fee is sent to the perpetrators, there is little chance of recovering those funds.

The Bureau notes that Maine has many reputable licensed lenders, and advises consumers to never wire or mail certified funds to unknown lenders.  The Bureau recommends that consumers deal only with known, licensed lenders, and encourages consumers to call the Bureau toll-free at 1-800-332-8529 to verify the status of lenders or check the Bureau’s licensed supervised lenders at www.credit.maine.gov.

The Bureau of Consumer Credit Protection is part of Maine’s Department of Professional and Financial Regulation.   The Bureau licenses lenders, creditors and collectors; conducts periodic examinations of creditors to determine compliance with state laws; and responds to consumer complaints and inquiries.

Automobile Financing and Purchase Rights as Presidents’ Day Sales Approach

Maine’s Bureau of Consumer Credit Protection Outlines Consumers’ Rights

Agency Offering “Downeaster Guide to Consumer Credit”

GARDINER –  In advance of Presidents’ Day auto sales events, Maine’s Bureau of Consumer Credit Protection is encouraging consumers to evaluate vehicle financing options and to understand their rights.

“For most of us, a new or used vehicle is the second-largest purchase we’ll ever make, second only to buying a home,” said David Leach, Principal Examiner at the Bureau.  “We encourage the thousands of Maine residents who will visit auto dealerships during the upcoming sales to become familiar with financing details and their rights as consumers.”

The Bureau outlined key facts and recommendations to keep in mind when considering a vehicle purchase from one of Maine’s many reputable auto dealers.  Additionally, the agency is making a “Downeaster Guide to Consumer Credit” available by calling 1-800-332-8529 or visiting www.Credit.Maine.gov and clicking on “Consumer Guides.”  It’s a valuable source of information about financing various purchases and dealing with credit in general.

1) Assess your personal finances before you buy.  Understanding what you can afford is an important starting point.  Don’t commit too much of your income and savings at the expense of your household obligations over a four, five or six year auto contract. 

2) Learn all you can about the car or truck you want to purchase.  Various magazines, books and reliable internet sites offer reviews of mechanical reliability, overall owner satisfaction, pricing information, and depreciation rates of cars and trucks.  Many dealerships also list their inventory and prices online.

3) Compare sources of credit.  Contact your local bank or credit union to determine their loan rates for new and used vehicles, and determine the available annual percentage rate (APR) and other credit terms.  Then compare the APR and terms to those offered by the dealer.  Negotiate the vehicle price first, then use the information from lenders to separately evaluate credit plans available from the dealership.

4) Get the best price for your trade-in.  Using print and internet sources, gain a clear understanding of the value of your trade-in to help you negotiate all aspects of the transaction with the dealership.

 5)   Limit the repayment term.  Some dealers now offer 7-year financing.  Consumers should consider whether the vehicle last that long, and avoid financing for longer than its useful life.  While monthly payments may be lower with a longer contract, more interest will be paid over time. 

6) Avoid no-money down financing, if possible.  Making a down payment of at least 20% toward the vehicle’s sale price will help minimize the chance you’ll owe more than it’s worth.  If you need to sell the car, a down payment may help you to break even or even get some equity out of the sale. 

7) Understanding your rights.  The law does not provide a return policy or “cooling off” period for an auto purchase.  Once a deal is finalized, you do not have the legal right to change your mind and cancel the contract.  Make sure you are comfortable with all aspects of a transaction before agreeing to the purchase.

 “Maine has many outstanding auto dealerships that provide excellent service to consumers.  Dealers respect knowledgeable shoppers and are generally willing to work with them to arrive at a deal that is acceptable to both the consumer and the business,” Leach added.  “Buying a car should not be an impulse purchase.”

Maine Man Sentenced for Theft in Advance-Fee Loan Scheme

AUGUSTA – Attorney General William J. Schneider and Maine Securities Administrator Judith M. Shaw announced today that Donald R. Shields, 66, of Augusta and Boothbay Harbor has been sentenced in Kennebec County Superior Court to two years in prison, with thirteen months suspended, and one year of probation on one count of felony theft in connection with an advance-fee loan scheme he operated.

The scheme targeted distressed businesses unable to obtain conventional financing.  Shields solicited payments from business people who were seeking commercial loans after falsely claiming that he had the intent and ability to secure the loans.

“Donald Shields conned savvy business people into believing he had connections with investors and the ability to obtain commercial loans for their businesses when conventional financing appeared to be unavailable.  Businesses and individuals should be suspicious of any individual who promises to obtain a loan or line of credit in exchange for an upfront fee,” cautioned Administrator Shaw.

Shields pled guilty in June 2010, but sentencing was deferred in accordance with a plea agreement to allow him to comply with the terms of the agreement, including paying $10,200 in restitution.

“We are pleased to bring Mr. Shields to justice and obtain full restitution for his victims,” said Attorney General Schneider.  Shields had prior state and federal convictions for forgery and mail fraud dating back to 1999.

 Shaw urged anyone being asked to pay an upfront fee for a commercial loan to contact the Office of Securities for assistance.  “Individuals offering advice on securing a commercial loan are not required to be licensed but our Office can provide information to help business people and investors spot potential scams.”

To check an adviser, salesperson or for information related to investing, go to www.investors.maine.gov, call 1-877-624-8551 (TTY 1-888-577-6690) or write to the Maine Office of Securities, 121 SHS, Augusta, Maine 04333-0121.

This case was prosecuted by Assistant Attorney General Michael Colleran, of Attorney General Schneider’s Financial Crimes Division and was investigated by Jacqueline Drouin of Maine’s Office of Securities.

The Office of Securities is part of Maine’s Department of Professional and Financial Regulation, which encourages sound ethical business practices through the regulation of insurers, financial institutions, creditors, investment providers, and numerous professions and occupations for the purpose of protecting the citizens of Maine.