In the mortgage industry large amounts of money change hands every day. This unfortunately inspires the unscrupulous to devise scams to get their hands on it. While a great effort and much progress has been made to thwart these scams, they are still a major problem for the real estate industry and homeowners. Here are some tips on what to keep an eye out for and how to avoid these scams.
This one will seem too ridiculous to be true, but it’s real, it’s effective and it’s devastating. Thieves will pose as lawyers or mortgage professionals promising to modify or refinance a homeowner’s mortgage. They will ask the borrower to sign paperwork allegedly pertaining to the transaction. However, one of the pages will be a deed that, once signed, will transfer ownership of the property either to the perpetrator or to an accomplice or company they’re associated with. Victims will often be so overwhelmed by the content or lulled by those cheating them that they are blind to the scam being pulled. Some of the especially unscrupulous will exploit a language barrier.
Don’t Bank On It
Banks will often buy and sell mortgages, so the company handling your loan may change. Armed with this information, con artists will create fake companies, pretend they are the new owners of your loan and take your payments. With no way to know they’re being scammed, the homeowner will go along with the acquisition until they are notified by their actual lender that their mortgage is in default. By law, the borrower should be notified any time the servicer of their loan changes. They should receive a "goodbye" letter from the current servicer and a "hello" letter from the new servicer.
Some frauds will buy a severely neglected fixer-upper at a bargain price. They’ll make bare-minimum, mostly aesthetic “upgrades” on the home, then work with an appraiser who will artificially inflate the property’s value. Others, like a closing agent, may be brought in to help lure an unsuspecting buyer into securing a loan for the property. The cons run off with the profit and the buyer is left with a money pit. Do yourself a favor and get a second opinion.
Equity Stripping (also known as Equity Skimming) is a process in which the homeowner, facing foreclosure, agrees to sign their deed over to another party in exchange for the ability to rent and eventually repurchase the home after they get on their feet. The scammer pockets the rent payments and allows the bank to foreclose on the house and send the renters to the streets. While these methods can be ethically conducted and beneficial to the parties involved, many times they are based on fraudulent terms.
According to the Mortgage Assistance Relief Services (MARS) by the Federal Trade Commission, mortgage relief companies may not collect any fees until they have provided consumers with a written offer from their lender or servicer, along with a description of the key changes to the mortgage that the consumer decides is acceptable. Despite this and repeated warnings through numerous education campaigns, many homeowners still fall victim to scams involving upfront fees. Even for those that are aware of the rule, crafty cons will try to outwit you by saying they are charging for “doc preparation” or offering a money-back guarantee. A borrower can pay thousands for services they never receive.
Cons are smart, but you can outsmart them. Be aware of pressure being put on you to make a decision – this can be a red flag that something isn’t right. Be on the lookout for scam artists posing as others (for instance, representatives from government agencies like HAMP or HAFA) or even worse, corrupt individuals with actual titles.
If you believe you are the victim of a mortgage relief scam, you can contact one of the following agencies to report it:
FTC.gov or call (877) 382-4357
PreventLoanScams.org or call (866) 459-2162
HOPENOW.com or (888) 995-4673
Sigtarp.gov/contact_hotline.shtml#theform or call (877) 744-2009
In addition to reporting a scam, be sure to tell your servicers immediately as well.
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