Top 10 Signs of Mortgage Scamming

Mortgage Fraud-150x150Over the past 5 years, mortgage scams have risen by more than 75 percent. Many Americans have been rushing to banks and other financial institutions to take out a first mortgage, second mortgage or to refinance their mortgage. This gold rush has led to a significant increase of mortgage fraud. Some mortgage scams are purely operating websites only (virtual offices) as they obtain people’s credit information and disappear with millions of dollars from innocent citizens. Other scams come in different forms, so it’s important to educate yourself on what to look out for.

Reasons for the Rise of Mortgage Fraud

  • The rising demand. The demand for mortgages over the past decade has tripled compared to the last 40 years in the United States. This gold rush for loans from citizens has led to a massive increase in the levels of mortgage fraud.
  • Increased use of online services. Mortgage scams and fraudsters are at their best when working online. They create websites with attractive products, fast responses and immediate approval—features which obviously attract vulnerable borrowers. In most cases, they don’t have physical offices.
  • Ignorance of the law. A rise in mortgage fraud is also prevalent because many borrowers don’t know the law. Those with any banking or law knowledge, and some knowledge about the rules of Freddie Mac and Fannie Mae can therefore easily take advantage of borrowers.
  • Mortgages being viewed as a source of cash. Second mortgages and refinanced mortgages, depending on the terms and the lender in particular, always provide extra cash to the borrower. Since many Americans are in need of cash, the fraudsters take advantage of this need and rush to con the applicants.

Signs of Mortgage Scamming

  1. Upfront charges. Terming themselves as forensic loan auditors and foreclosure prevention champions, mortgage scams will ask you for upfront fees to offer you these services. They will offer to give you their report so that you can use it against foreclosure, reduce your loan, speed up the process of loan modification or totally cancel your loan. However, all of these are fantasies in the real financial world.
  2. Offer to do all the paperwork for you. They will often offer to fill out all of the necessary documents on your behalf. This is not the usual characteristic of a true mortgagor who requires you to do the paperwork yourself.
  3. Purchase loans are disguised as mortgage refinances. A purchase loan is actually an amount of money which is acquired in order to purchase cars, houses and other forms of property at variable or fixed interest rates. On the other hand, a mortgage refinance is a replacement of the existing obligation with a debt obligation under unique terms. Such a disguise will only lead to more problems than solutions.
  4. Falsified documents to support the loan documentation. They will easily accept fake credit reports because they know that all they want from you is money. They sign fake brokerage deals and lawyer’s agreements to start off the deal.
  5. Material misstatements. All the mortgage scammers are characterized by misrepresentation and omissions upon a lender or an underwriter in the process of funding, insuring or purchasing a loan. This has been released by the FBI and is one of the leading checks used to investigate mortgage fraud. These scammers also promise you that they will modify your mortgage in a bid to prevent a foreclosure regardless of all the circumstances surrounding you.
  6. Inflated and exaggerated appraisals. Normally, a mortgage company requires appraisal reports of a house from several appraisers so that they can make a comparison and pick the most reliable figure. However, scammers have an inflated appraised figure of the house which has only been prepared by a single appraiser to suit their selfish needs. This often translates to a huge down payment and high monthly repayments.
  7. High commissions and bonuses. Since they promise you “impossible” services, they will always ask you for huge fees for services offered and bonuses for the “guaranteed” results. They require high brokerage commissions because they offer to do everything on your behalf.
  8. Form of payments. Other than the usual mortgages which require you to repay in terms of bank transfer, mortgage scams have several forms of payments including cash, checks and wire transfer. These forms of payments are not only aimed at fooling you to recognize how advanced they are but also escape the rigorous audit process instituted by banks.
  9. Request you for the power of the attorney. Taking advantage of your ignorance of the law, mortgage scams ask you to confer upon them the power of the attorney so that they can use it to enforce the law.
  10. Invite you to leaseback schemes or equity strips. If you are languishing in problems because you are unable to repay your mortgage, then a mortgage scam will promise to help you come out of that situation quickly. To avoid a looming foreclosure, they will sign a deed over to a virtual rescuer in exchange for continuing to live in the home just as a renter. Meanwhile, the rent payments go towards buying your property back (in somebody’s pocket).

In case you’ve realized that you have been scammed then you should quickly report the incident to the Consumer Financial Protection Bureau (CFPB) for further investigations. If you are about to take out a mortgage loan, then be careful where you tread to avoid these huge financial scams.

Finding a Mortgage Broker

Mortgage-BrokerGetting the best mortgage for your particular situation can be overwhelming, but if you find a mortgage broker or banker whom you trust they can help you with every decision. The key is trusting them. Someone that has been referred by a friend or family member would of course be the best of circumstances.

Some people may not have the luxury of knowing someone in the business or having a friend that has been through the home loan process. In that case, you can contact your local board of realtors or the National Association of Mortgage Brokers for a list mortgage brokers or bankers in your area. Definitely do your research on them and check references.

You want to find out first if they are licensed. This is extremely important. Find out how many lending institutions they do business with and how good their relationship is with that institution. This will allow you to have several choices in programs and rates that will suit you and your situation.

Find out what their fees are and how they are compensated for your loan. Ask the broker about the different loan programs they have access to and how they will work for you. Ask them why you should work with them over anyone else. They are well aware you have many options in this department.

mortgage brokerSome brokers may recommend specific programs because they get paid more on them. Make sure you either trust the broker or you have done your own research and homework on the specific programs. If you have bad credit most likely your mortgage rate is going to be higher than normal, but make sure your broker does not hide fees by raising your interest rate on you. This occurs more frequently with people whom do not have good credit.

Finally, be cautious of anyone that tells you exactly what you want to hear. Always remember, it is their job to sell you a program and they make money when they do. A good broker won’t force a particular program on you.