Avoiding Mortgage Scams
by Shawn Carvin, Senior Mortgage Banker
Mortgage scams are commonly perpetrated by nefarious individuals preying on the financial difficulties of homeowners. Facing a foreclosure or other crisis is incredibly stressful. But when you’re looking for hope and help, it’s important to keep your guard up. While legitimate homeowner assistance programs are available, there are a number of common mortgage scams to watch out for.
Paying up front
You should never have to pay up front for any service related to mortgage relief. It’s illegal for a company to ask for payment before you receive a formal offer from your lender to restructure your loan. Many people lose those fees this way, with no service provided.
Having you avoid contact with your lender
No legitimate company will tell you to stop contacting or paying your lender while they re-negotiate your mortgage. A scammer might ask you to pay them instead while your loan is being restructured. Many people who have been taken in by mortgage scams like this one have been devastated by falling even further behind on their mortgage, often leading to foreclosure.
Lease/buy back agreements
Perpetrators of mortgage scams often review public records to find houses that are facing foreclosure, allowing them to target people who may be the most desperate for help. They’ll offer a legit-looking contract showing how the homeowner can pay a drastically reduced monthly rent payment to them, with the ability to buy their house back. They’ll also assure the homeowner that signing over the deed to them is just temporary.
This scam can end in a variety of ways, none of them good. The scammer will often just pocket the rent payment until the lender forecloses on the home. They can also raise the rent until the homeowner can’t afford to live there anymore. Or, they can just sell the house out from under the homeowner. And the homeowner is still saddled with the debt from their original mortgage.
Another variety of this scam has the con artist giving the victim a stack of paperwork to sign for their “loan modification.” Most of the documents are fake, except for the one where the homeowner signs away the deed to their house.
Your mortgage has been “sold”
Lending institutions buy and sell mortgages regularly, so it is common for a mortgage loan to originate with one lender, and eventually be placed with a different financial institution – it can even happen several times during the term of a loan. Scammers take advantage of this fact by sending out realistic-looking notices to homeowners with new payment instructions. If you get such a notice, make sure that the sender and information is legitimate. Before a new institution starts servicing your loan, you will be notified by your current lender about the change. If there is any doubt in your mind, it never hurts to ask questions.
What you can do to avoid mortgage scams
- Use the Internet wisely. The Internet is a valuable tool for both consumers and criminals. Always verify that you’re using legitimate web sites.
- Be wary of email offers. While some are legitimate, many are not. Never click on a link in an email unless you are 100% certain that it’s from a valid sender.
- Pay attention to what you sign. Scam artists can make very convincing-looking documents. When in doubt about what documents are being asked to sign and what they mean, seek the advice of an attorney.
- Communicate with your lender. This is the most important part of preventing fraud. Your lender is the first contact you should make when you want to discuss loan modification or mortgage relief.
- Get advice. Whether it’s your current mortgage lender, your bank, or an attorney, you can find experts to help guide you through the mortgage relief process.