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Beware of Scams

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If you own a home, there is probably not a week that goes by that you don’t receive a solicitation by phone or mail from someone trying to sell you a home equity loan. While the majority of these solicitations may be genuine, there are many out there that aren’t.

It’s not that fraudulent mortgage practices haven’t been going on all around us. It’s just that now they’re becoming more blatant. Only a handful of mortgage fraud is caught, but all of it, in the final analysis, costs the consumer. With recent changes in the real estate market, the instances of fraud are more likely to increase than decrease. We should all be aware and alert to the bold new practices of today’s mortgage bandits.

The following are some of the more common ways in which you may be scammed:

• Loan flipping – A lender encourages you to refinance your loan and borrow additional money over and over again. In refinancing this loan the lender charges you high points and fees and a higher interest rate than the original loan. Each time you flip the loan, you increase your debt until you are in over your head. Remember, your home is at risk.
• Loan shuffle - Interest rates unexpectedly change, loan programs are suddenly no longer available, or closing costs abruptly increase causing you to tap into funds that were reserved for another purpose. Online mortgage shopping can be dangerous. Very often, out of state mortgage lenders do not structure their advertised programs to be in compliance with your state’s legal requirements. The purpose of these “pop-ups” and “banner ads” is to capture the attention of potential customers and to hopefully engage them enough so as to keep them from shopping any further. Watching the shuffle can help you weed through many questionable promises before you ever make contact with the mortgage company.
• Dirty documents - Most purchase loans and many refinance loans require the borrower to demonstrate an ability to repay several months of the loan even if they lose their job. This money is usually held in reserve via a savings or an investment account. Some borrowers have the credit scores and the income to qualify for the loan, but lack adequate reserves (usually 3 to 6 months of monthly mortgage payments). Mortgage providers who are under pressure to produce business can and will falsify these documents as well.
• Signing over your home deed - You are having trouble paying your mortgage and have been threatened with foreclosure. A lender offering to help you find new financing contacts you. The lender asks you to temporarily deed you property over to him to prevent foreclosure. The lender now owns your home and you have become a renter of the property.

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