Fed Issues Warning To Homeowners
Friday, February 16th 2007, 12:57 pm
By: News On 6
WASHINGTON (AP) _ Homeowners beware: You could be victimized by a certain scam where someone tries to lure you into applying for a loan secured by your home.
The Federal Reserve put out that warning Friday in response to questions and complaints from people about direct-mail solicitation scams that describe a ``Community Reinvestment Act Program'' that entitles certain homeowners to cash grants or equity payments. No such federal program exists, the Fed said.
``Some of these solicitations may be read to indicate that the Federal Reserve endorses or supports the offers they contain,'' it said. ``These solicitations appear to be a deceptive effort to encourage consumers to apply for a mortgage loan secured by the consumer's home.''
The central bank didn't provide further details.
``The Federal Reserve cautions the public about loan solicitations or other offers from lenders or mortgage brokers that offer consumer cash grants or equity disbursements as part of a `CRA Program,' `` it said in a statement.
There is, in fact, a 1977 federal law called the Community Reinvestment Act. It encourages banks and other financial institutions to help meet the credit needs of their communities, especially low-income neighborhoods. But that law does not entitle people to any grants or loans.
The Fed urged people considering taking out a loan secured by their house to shop around.
The Fed's warning came a day after board Chairman Ben Bernanke was questioned by House lawmakers about deceptive practices in consumer lending in general.
Bernanke said that handling such complaints can pose a challenge for regulators. ``We found that it's very difficult to write rules in advance that strike out entire practices under all circumstances,'' the Fed chief said during a House Financial Services Committee hearing Thursday. ``We find it's more effective to be flexible and work on a case-by-case basis. It's one of these things like, you know it when you see it.''