It took nearly 13 months and a change in administration, but Florida's Attorney General's Office has finally issued an official consumer advisory warning Floridians of common mortgage fraud scams. Back in January of 2006'as evidenced by this blog entry, I sent a letter to each and every states' Attorney General warning of the growing problems associated with real estate and mortgage fraud. Last Friday, Florida's recently elected Attorney General, Bill McCollum, revealed that mortgage fraud-related scams are included among the top ten categories of complaints received by his office over the last 12 months, and encouraged residents to be aware of scams and fraud aimed at Florida homeowners.

There are several variations of home equity scams which homeowners everywhere should be aware. Equity Stripping occurs when a lender encourages a prospective homeowner to manipulate their loan application in order to qualify for a greater loan amount. Loan Flipping involves lenders who repeatedly encourage homeowners to refinance their loans, which may require them to borrow more money and as a result, accumulate higher fees. Other scams include baiting and switching, where the lender offers one set of terms prior to the loan application and then pressures consumers to agree to a different set of terms after the application is signed. Deceptive Loan Servicing, another common complaint, happens when lenders do not provide their clients with accurate or complete account statements and payoff figures.

Consumers shopping for a mortgage loan should take into consideration high interest rates and additional costs which could place undue financial burdens. Always shop around before choosing a lender and do not sign a loan agreement if the terms are not the same as those you were given when you applied. You should also always ask for explanations of any dollar amount, term or condition you don't fully understand, and if you're using a broker, research the brokers' credentials to ensure they are properly licensed and certified before entering into a contract.

In addition to tips, strategies, and warnings that can be found throughout FlippingFrenzy.com, Florida's Attorney General's Office provides the following tips to consider when applying for home equity loans:

• Keep careful records of any amount paid
• Lenders should never pressure applicants
• Read all items on the contract or application carefully
• Never sign an application or contract with blank spaces
• Ask specifically if credit insurance is required as a condition of the loan
• Check contractors' references for any construction and get more than one estimate

Florida's Home Ownership and Protection Act of 1994 addresses certain unfair and deceptive practices in home equity lending. The law establishes requirements for certain loans with high rates or high fees. Additionally, the act prevents balloon payments, which are large lump-sum payments scheduled at the end of a series of considerably smaller periodic payments and negative amortization which arises when the mortgage payment is smaller than the interest due and causes the loan balance to increase rather than decrease. The law also prevents default rates that are higher than pre-default rates and most prepayment penalties.