Don’t Get Ripped Off by these Six Common Mortgage Scams

Posted by Marion Franke
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Don’t Get Ripped Off by these Six Common Mortgage Scams

Not everyone that offers you a mortgage can be trusted.  It’s sad to say, but in both rising and falling real estate markets, you can find scam artists.  Many of the methods have been around for decades.  Some use the digital age to scam buyers or sellers.  

Buyer Scams

  • Internet-Based Lender:  While almost every mortgage company is online and only a tiny fraction of them are fraudulent, the internet simply makes it easier than ever.  Some of them will collect application fees up front with no intention to process your mortgage.  Make sure you confirm a physical address and lots of contact information before you send money to a lender.
  • Too-Good-To-Be-True Rates:  This is also done more frequently in the digital age.  Real estate buyers want to be in control of the buying process.  Sometimes they are even suspicious of a real estate agent that recommends someone they trust.  If you trust your agent, you really should trust their lender recommendation…this is why.  If a lender treats a real estate agent’s clients poorly, they lose much more than one transaction.  They will go out of their way to make sure you are treated fairly.
  • Lenders that ignore contract conditions:  While this type of lender may not be considered a scam artist by many, the fact that they do not comply with the conditions of your contract can cost you a great deal of money when rate locks expire, sellers require additional deposits to extend the contract and various other penalties.  Some national banks have a reputation for this type of loan processing.  Yet another reason to find a lender that has a proven track record for delivering the loan on time and according to the terms you expected.

Homeowner Scams

  • Refinance Fraud: in search of lower interest rates, some people have been lured into literally signing over the deed to their property.  The theft occurs when a con artist poses as a professional lender or attorney.  When the stack of papers is presented to the homeowner, one of the documents to be signed is a deed transferring ownership to the fraudulent company.  These unscrupulous ‘lenders’ like to prey on those that may not understand what they are signing because English is not their primary language.
  • Claims that Your Mortgage has been Sold:  Mortgages get sold all the time legitimately.  So there is no reason to be shocked when homeowners get a letter telling them to send payments to a new company at a new address.  However, federal rules demand that the current mortgage servicer sends you a letter saying “good-bye”.  If you just get a letter saying to send payments to a new place, confirm with your old lender that it is real.
  • Reverse Mortgage Scams:  Again, the con-artist uses legitimate mortgage practices to entice homeowners to part with their money.  Be extremely careful about who you trust with a reverse mortgage.  Reverse mortgages are for people over the age of 62 and they promise that you can keep ownership, while cashing out equity.  The complexity of the process makes it easy for the scammer to steal the equity in the home or even use older people as straw buyers to fraud both the senior citizen and a mortgage company.
Categories: Home BuyingHome MarketingGeneral
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Disclaimer: The views and opinions expressed in this blog are those of the author and do not necessarily reflect the official policy or position of the HRIS.
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