“At this moment, New Yorkers are being flooded with talk radio ads, mailers, fliers on car windshields, all of which are promising to refinance your mortgage for free,” Schumer said. “The problem is, just like with subprime loans, these refinancing schemes come with massive hidden fees that ultimately will cost the homeowner a lot more.”
In the last week, 69 percent of all mortgage applications submitted last week were refinances, according to the Mortgage Bankers Association. That’s the highest increase of refinancing activity the MBA has seen in 18 years. The reduction in mortgage rates, which in New York average 5.5%, is a result of the Federal Reserve’s purchase of $500 billion in mortgage-backed securities last month.
Schumer said that the same “scam artists” that gave subprime mortgage loans are now targeting homeowners looking to refinance. Such schemes are targeted toward a variety of communities: “Poorer and middle class, all over—Long Island, Brooklyn and Queens, the whole metropolitan area,” said Schumer.
Look out for wording like “no credit check,” “no closing costs,” and “100% free quotes” in advertisements. If it sounds too good to be true, it probably is. “There’s no such thing as a free lunch,” Schumer warned.
Josh Zinner, co-director of the Neighborhood Economic Development Advocacy Project, cited one tactic refinance companies use. “Entities are soliciting people promising help with loan modifications. They charge several thousands of dollars up front, promising to assist people, and then just walking off with the money,” he said.
It is unknown how many people have fallen victim to such advertising schemes so far, since the refinancing trend is a relatively new phenomenon.
Schumer is planning to reintroduce a bill to regulate mortgage lenders. His bill, the Borrowers Protection Act, would establish a fiduciary duty and puts the onus on the lender to assess a borrower’s ability to repay a mortgage. It was originally introduced last May but was shot down in Congress due to opposition, he said. “I believe it will pass in the new Congress with a big change in who the Senators are,” Schumer said.
He also submitted a letter urging the Federal Trade Commission to issue alerts to consumers about such scams.
