Are you aware of deceptive mortgage practices that can significantly hike your costs over time? Here are six ways your lender may be playing the system and what you can do about it:

• Yield Spread Premium (YSP) Abuse
• Force-Placed Insurance
• Unnecessary Escrow Cushions
• Hidden Fees and Penalties
• Adjustable Rate Mortgage (ARM) Abuse
• Loan Flipping

1. Yield Spread Premium (YSP) Abuse

This occurs when there’s an unexpected increase in interest rates or a sudden change in your loan terms.

Watch out for:

An unexpected increase in interest rates or a sudden change in loan terms.

Take action by:

Ensuring you fully understand your loan agreement before signing. If you suspect YSP abuse, consider seeking professional legal advice to explore your legal options.

2. Force-Placed Insurance

This deceptive practice involves a significant increase in your mortgage payment due to a new insurance policy that you didn’t purchase.

Watch out for:

A significant increase in your mortgage payment due to a new insurance policy you didn’t purchase.

Take action by:

Keeping your homeowner’s insurance up to date and proving coverage to your lender annually. If force-placed insurance has been added unfairly, contact your lender and provide proof of your existing coverage.

3. Unnecessary Escrow Cushions

This happens when your lender requires more funds in your escrow account than legally allowed.

Watch out for:

Your lender requiring more funds in your escrow account than legally allowed.

Take action by:

Knowing your rights concerning escrow accounts. Keep track of your payments and statements, and if your lender is violating the Real Estate Settlement Procedures Act (RESPA), file a complaint or seek legal advice.

4. Hidden Fees and Penalties

This occurs when your monthly mortgage payments are higher than you expected based on your loan agreement, or there are unexpected costs at closing.

Watch out for:

Higher-than-expected monthly mortgage payments based on your loan agreement or unexpected costs at closing.

Take action by:

Reviewing all documents thoroughly before signing, making sure you understand all fees and penalties. If you discover hidden fees after signing, consult with a legal professional to explore your options.

5. Adjustable Rate Mortgage (ARM) Abuse

This deceptive practice can lead to your interest rate and mortgage payments becoming much higher than expected, especially after an adjustment period.

Watch out for:

Interest rates and mortgage payments that are much higher than expected, especially after an adjustment period.

Take action by:

Fully understanding the terms of an ARM, including when and how rates will adjust. If you’ve been misled about the terms of your ARM, don’t hesitate to consult with a mortgage or real estate attorney.

6. Loan Flipping

This is when your lender encourages you to repeatedly refinance your loan, and with each refinance, you’re paying high fees or penalties.

Watch out for:

Your lender encouraging you to repeatedly refinance your loan, with each refinance resulting in high fees or penalties.

Take action by:

Being skeptical of refinancing offers that seem too good to be true, particularly those that come soon after a previous refinance. If you suspect you’ve been a victim of loan flipping, it may be time to seek professional legal advice.

Remember, if you believe you’re a victim of any deceptive mortgage practice, it’s crucial to consult with an attorney or legal professional. At Watson Law LLC, we provide guidance tailored to your unique situation and help you understand your rights and possible remedies. Don’t hesitate to contact us if you need assistance.