Reverse mortgage scams on the rise: Reverse mortgages allow people 62 and older to borrow against the value of their homes to raise cash. The loan doesn't need to be repaid until the borrower moves out, sells the property or dies.
During the 12 months through October 2008, the Federal Housing Administration backed 112,000 reverse mortgages. That's up from 76,282 during the same period through October 2006. The FHA insures most reverse mortgages issued in the U.S.
Scams involving reverse mortgages are becoming more frequent. The FDIC cited reports of "companies attempting to sell questionable home repairs or investments in connection with a reverse mortgage." There have been companies that charge fees to provide information on reverse mortgages that's available for free through the Department of Housing and Urban Development.
When considering a reverse mortgage, check with a few lenders and review what's available, then discuss the alternatives with a HUD-approved housing counselor. Depending on the borrower's income and the amount of cash he needs, a home equity line of credit might be a better choice.
Kickbacks continue with car loans: To help sell cars, most auto dealers will arrange financing, usually offering a few options with different lenders. The problem is that lenders often pay dealers bigger commissions for offering loans with higher interest rates. That encourages dealers to arbitrarily add points to the rate a borrower qualifies for based on his credit score, according to the nonprofit Center for Responsible Lending.
A questionable practice known as "loan packing," when a dealer bundles an attractive financing plan with costly items such as extended service plans, also remains a problem, according to the organization. Consumers must also watch out for "yo-yo financing," when a buyer signs a conditional sales contract based on a certain rate and takes the car home only to have the financing fall through, forcing the customer to renegotiate the rate.
Rosemary Shahan, founder of Consumers for Auto Reliability and Safety, recommends that consumers steer clear of dealer financing entirely. If you plan to borrow through a dealer, your negotiations should focus on the car's total price instead of your ideal monthly payment, which creates more potential for dealers to manipulate loan terms.
Before stepping into a dealership, shop around for alternative loan options from banks and find out your credit score.
—For the best rates on loans, bank accounts and credit cards, enter your ZIP code at BankingMyWay.com.