The slowly recovering housing market and national economy has created a perfect environment for mortgage scams to proliferate. Homeowners that are desperate to save their homes will often turn to any resource that they believe will help them. This makes them easy targets for mortgage scammers who tell the homeowners what they want to hear and make their offers sound like they are solution to all of the problems that the homeowner is facing. Unfortunately, if you fall for the scam, you may find yourself losing your money and your home. Here are some common mortgage scams that you should take care to avoid.
Signing Over Deed
One of the most common scams facing homeowners is getting tricked into signing a deed that transfers ownership of the property to another party. In this scam, the scammers offer to help the homeowner refinance their mortgage into one with better interest rates and lower mortgage payments. The borrower is then asked to sign documents in a large stack of papers, one of which is a deed to the property that transfers ownership to the scammers once signed. Because many people do not stop to read all of the documents that they are signing, this scam is more effective than you may think. Never sign anything blindly and make sure that you read every page of anything that you are putting your signature on.
Fake Loan Modification
Another common mortgage scam is the fake loan modification. In this scam, the scammers pretend like they are helping you get a modification to your loan to make the payments or interest rate lower and easier to manage. You are required to pay the fees associated with the loan modification upfront, after which the scammers take your money and provide you with no help at all with your mortgage. Despite homeowners being repeatedly warned about this scam through numerous education campaigns, stories of borrowers who paid $1,000 to $5,000 for a fake loan modification and received nothing in return continue to be reported. It is important to verify the identity of any company that is promising inexpensive loan modifications because they may not be in the business of modifying loans at all.
Mortgage Sale Scam
Banks and other lenders have gotten into the habit of selling residential loans to other parties to get the loans off of their books. Scammers have found a way to take advantage of this by convincing homeowners that their fake company is the new owner of their mortgage loan and that they will need to make their payments to a different address and company from that point forward. Responsible borrowers make their payments as requested and often don’t know that they have been scammed until the original lender lets them know that their mortgage is in default. Under federal rules, whenever the servicer on a loan changes, the borrower should be notified with a “Goodbye” letter from the current servicer and a “Hello” letter from the new servicer. It is also a good idea to research the new company on the internet before beginning to send payments to them.
Join our newsletter
Subscribe to get the latest "Engineer Your Finances" content via email.