As many homeowners struggle to make mortgage loan payments, a stealthy breed of scam artists are crouched in the wings, waiting for a moment of homeowner desperation to strike. The unsuspecting loan borrower or potential home buyer should be educated about the dangers of mortgage fraud so that he or she can stay one step ahead of these predators. I would suggest to use a broker, cause based on my past experience, most secured loans are applied via a broker. Here are the three most frequently executed mortgage scams and how to avoid becoming a victim. (Note: It is important to speak with your attorney and/or mortgage professional about these as we are not legal experts!)
Loan Modification Fraud
A loan modification is usually the last-ditch effort an owner makes as an attempt to stall foreclosure. The average homeowner on the brink of foreclosure may not realize that his or her foreclosure status means that his or her housing affairs have been made public. With their status published for any and all to see, a certain kind of sleazy conman scours the public announcements in search of new blood. The scam is simple. The scammer lures in the homeowner with television and print ads that seem legitimate and promise to make the foreclosure go away. After the customer has paid the upfront fees for the loan modification that does not exist, the loan mediator disappears.
In order to not fall victim to the scam, be suspicious of any company or individual asking for payment to counsel you on foreclosure. There are many HUD-approved agencies that will do this for free. It’s also a good idea to stay up to date on new strategies that thieves and fraudsters are implementing.
Baiting Scam
Known as the old “bait and switch,” this scam involves a lender presenting a potential borrower with loan terms that seem incredible, with super low interest rates and monthly payments. After the would-be borrower spends excessive time and effort in the preparation for financing, and prepares to sign the papers, the lender pulls a switch-er-roo and presents completely different loan terms, minus the incredible aspects of the first one. This tactic is completely legal and many borrowers go ahead and sign the dotted line, feeling as though they have few options and worried they will not be able to borrow from another lender.
To assure you are not taken for a ride, be sure to avoid any party that solicits your interest through advertising flyers or door-to-door pitches. Most reputable lenders do not advertise in such a way.
Leaseback Scam
Another scheme that preys on the soon-to-foreclose owner is the leaseback scam, or equity stripping. A “mortgage rescuer” shows up in the nick of time, just before a lender is about to lose his home. The “rescuer” suggests the lender sign over the deed to the house to him and he would just kind of hold on to it, allowing the lender to stay in the home at rent with the option to buy the home back. Unfortunately, the “rescuer” now has the deed and receives the rent money. He does not pay off the mortgage, the renter now cannot afford the high cost of rate, and the house forecloses anyway, but the conman, by then is long gone.
When experiencing financial difficulties, it is best to go directly to your lender. They may be willing to strike a deal with you, and even if they are not, putting your home on the market for a fraction of its worth is a better option than going belly up, or worse, being taken by a con artist.
