From the “too little, too late” (for some of you) department comes our list of 24 Red Flags to be on the lookout for. Are you dealing with a wolf in sheep's clothing? (Maybe you already have!) Spotting any of these techniques listed below will help you identify and avoid lending predators in the future. If these don't ring any bells for you at this moment, at least you now have a resource which will keep you — or a friend or family member — from falling into this trap somewhere down the road.

If a mortgage broker or company utilizes one or more of the following marketing or sales techniques, or tries to get you to sign loan documents containing any of the onerous terms and conditions listed below… don't bite! Contact the Department of Housing & Urban Development (HUD) and rat 'em out instead!

Marketing

1. Mailings to low-income, elderly and/or minority neighborhoods claiming, in advance, that “You are already qualified!”
2. Home improvement scams
3. Racial steering (borrowers being referred to a high-rate lender because of their race and not their credit rating).
4. Promises of rescuing vulnerable homeowners from foreclosure: All it may end up doing is stripping any remaining equity you may have left in your home. Check out this terrific video (it's only 2 minutes!) from Freddie Mac.

Sales

1. Contract for Deed: Also known as a “Land Contract” or “Land Installment Contract,” cashes in on the unearned trust of home buyers. The title of the property remains in the seller's name until the buyer makes the final payment for the agreed upon purchase price. Only a “deed” can legally convey and interest in a property. The “contract for deed” is simply a promise to convey at a future point in time if the terms are fulfilled by the buyer.
   
   “Contract for deed” are terrible deals, as the following “worst case” scenario explains: The seller collects payments from the wannabe homeowner for years and then defaults on their loan/lien on the property, or fails to pay taxes on the property. The end result? The seller loses the property to the bank or taxing authorities and the buyer has nothing to show, since they never had a legal claim to the property itself.

2. Falsifying loan applications — particularly income level and if you will be living in the property: This happened in the great subprime boom of the 21 st century but the twist here is that it appears many borrowers were coached by mortgage brokers and in some instances, the brokers themselves actually changed information on the loan applications so that their borrowers could qualify for a loan…(and they could get their commission).
3. Adding co-signers: For the sole purpose of helping to improve your credit score, income level and other available assets where there is no other relationship between the parties and the home that will be occupied.
4. Targeting elderly homeowners: Reverse mortgage scams, home improvement/repair schemes and cash-out re-finance schemes all designed to strip out equity in the form of high origination and other unearned fees. The end result? More money going to the lender than the homeowner actually ends up receiving, resulting in a payment that the homeowner doesn't have the ability to repay.

5. Forging signatures and /initials on any documents, especially loan documents.
6. Requiring you to sign blank or incomplete documents.
7. Shifting unsecured debts into a mortgage:
8. Changing the loan terms at closing: If the loan terms are different from your final Good Faith Estimate (GFE), don't sign it! For example: If the interest rate is higher, the length of the note is longer or the Annual Percentage Rate (APR) is higher, and/or there are any new fees showing up that weren't on the GFE, this is a huge — and common — red flag.
9. Rent-to-own options with excessive interest rates and large deposits. “Bad Credit, No Credit, No Problem!” is the most frequent “come on” line used for these types of bad deals.

The Loan

1. High annual interest rates: Does your interest rate appear to be higher than the advertised “teaser” rate?
2. High points or padded closing costs: Any points, costs or fees that have not been previously explained to you, and/or were not disclosed on the GFE.
3. Balloon payments: One large payment at end of contract.
4. Inflated value of home or assets
5. Unnecessary broker fees: Any broker fees not disclosed on the initial GFE.
6. Required “credit life” insurance: Anytime the lender requires that you buy credit life, or tries to finance it into the loan…run the other way!

7. Falsely identifying pre-existing loans on the borrowers' credit report as lines of credit or open-end mortgages.
8. Mandatory arbitration clauses.
9. Flipping or repeated loan re-financing within 12 months of the note's origination or the last re-finance with little or no benefit to the borrower.
10. Extended pre-payment penalties: Any prepayment penalty that exceeds three years.
11. Refinancing low or no interest loans (such as Habitat for Humanity loans).