Tips for avoiding mortgage scams
Posted
Aug 19 2009, 08:14 AM
by
Karen Datko
Rating:
This post comes from Xin Lu at partner blog Wise Bread.
Rising home loan delinquencies and foreclosures have made con artists very busy.
These scammers use public records to find homeowners who are in trouble, and then use a variety of schemes to take their money and property in the name of helping them avoid foreclosure. If you have late payments on your home loan, it's likely you will be targeted.
The following are some warning signs that you are dealing with a possible scammer:
Unsolicited contact. If you receive an unsolicited call or letter promising help, verify that the person promising help is actually from your lender or servicer. Technically, only your lender or servicer has the power to modify your loan. Scammers use public records to find out the default status of homeowners, and some of them pretend to be the lender holding the lien. However, you can usually verify if the offer for help is real by contacting your lender's customer-service line.
Pretending to be from the government. We all know that there have been several federally sponsored loan modification and housing bailout programs. However, these programs ask homeowners to contact their lenders for help. If you receive unsolicited contact from people who say they are affiliated with the government, that's a warning sign that it's a scammer trying to sound legitimate.
Great promises. Con artists are usually very good salesmen, and many of them promise that they can get the homeowner out of trouble with certainty. If it sounds too good to be true, it usually is.
High pressure. If the nice promises do not work, some scammers go straight for the vulnerability of those in trouble. For example, they might ask a person if he or she really wants to live on the streets. If you feeling pressured or threatened by someone promising to help, it's a sign to walk away.
Advance fees. If a company asks you for a few thousand dollars to start the process, it's most likely a scam. When a legitimate lender modifies or refinances your loan, the costs are added up at closing. Once you hand over the advance fee, there is really no guarantee the company will do anything. There are legitimate housing counselors who charge fees for their services, but consumers should make sure that they have actually received the services before paying.
Diverted mortgage payments. Some scammers tell a troubled homeowner that they already negotiated a lower mortgage with the lender and that the homeowner should send the lower payment to the scammers instead of the lender. Even though this scheme is fairly easy to verify through the lender, sometimes troubled homeowners do not figure out that the lender is not receiving any money until months later.
Suspicious advice. Scammers often give advice such as "stop talking to your lender" or "you are not obligated to pay your loan." They want the troubled homeowner to talk to them only. Make sure to communicate with your actual lender.
Property transfer. Many scammers ask troubled homeowners to sign over the property so that they can make the mortgage payments. The fact is that the scammers do not have to make mortgage payments on the property, and often use the properties to defraud lenders.
Power of attorney. Some scammers ask troubled homeowners to sign over power of attorney to another person. This basically allows them to act on the homeowner's behalf on many legal documents. Giving away the power of attorney is actually worse than signing away the home.
If you suspect that you are being scammed, you should report the details to the FBI or the Federal Trade Commission as well as your local consumer-protection agencies. If you really need help dealing with your lender, there are legitimate housing counselors available through HUD and their services do not cost thousands of dollars.
Related reading at Wise Bread:
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Get free construction materials from demolished housing developments
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