Predatory Lending Sabbath/Sunday is an AARP program Saturday and today in Kansas to alert older people of home loan scams. Churches and synagogues are being asked to provide AARP materials to their members and friends about this national problem.

Being a smart consumer means knowing the right way to borrow. Using your home equity to borrow can cost too much, and not paying the loan could cost you your home.

Locally, an older woman living alone on Social Security was convinced by a door-to-door contractor to have $13,000 in home repairs. She had explained she lived on a fixed income, but the contractor assured her she could afford repairs on a mortgage loan of her house. He brought a lender to her home; they fast-talked her into signing a 60-page mortgage loan in 30 places and did not give her a copy of what she signed. The work was of poor quality and not completed as promised. The mortgage totaled $25,000.

Predatory practices include the following:

l High interest, such as 24 percent, when mainstream borrowers are paying 7 to 8 percent.

l High closing cost, such as 10 percent loan origination fees, when conventional fees are 3 to 4 percent.

l Prepayment penalties up to 20 percent when most do not have this penalty. Kansas law prohibits prepayment fees after the mortgage exists more than six months.

l Credit insurance that includes life insurance, disability insurance, unemployment insurance and other unjustified policies, when insuring repayment of the principal loan is all that is justified.

You should only borrow for home improvements after you get three written detailed bids from licensed, bonded contractors. The contract should spell out the what, where, when and for how much. A clear contract can protect you when something goes wrong. Be cautious of financing offered by the contractor. Dishonest mortgage brokers and contractors often work together to take advantage of homeowners. After you have a contractor’s estimate, get several estimates for the financing. Then ask your housing counselor to explain all the terms of the financing agreement. If the repair contract was signed in your home, you have the right to cancel the repair contract by sending a letter within three business days.

Help for fraud victims

There are Kansas and federal laws to protect you. Under the federal Truth-in-Lending Act, a homeowner is entitled to rescind a mortgage contract for three business days after receiving certain disclosures concerning the loan. If the disclosures are not properly made or if notice to the right to rescind is not given, the borrower can rescind the contract for up to three years. There are some exceptions to this rule; however, a lawyer or our office can explain them should you need information. If you think your contractor or lender is fraudulent, notify:

Local police

The district attorney for your area, or

The Kansas Attorney General’s Hotline (800) 432-2310.

If your problem is a truth-in-lending or mortgage servicing issue, you should contact Department of Housing and Urban Development, Office of Single Family Housing, 451-Seventh St. SW, Room 9282, Washington, D.C. 20410, 202-708-6396.