Mortgage lending scams are so prevalent in today’s market that it is scary, and while this is not a normal Scam Times article I must get it out because to many seniors and bad credit borrowers are getting scammed left and right. I also feel some of these scams led to the housing bubble and we do not want to relive that horror. We all know that in every single business there are unscrupulous business operators who feel they have the right to take advantage of anyone and everyone they come in contact with. So we want to help people and we need your help, If you are aware of any company that is in the mortgage fraud or scam business post a comment with who they are and what they are doing so we can investigate, you should also report to the proper authorities.
Mortgage scams target the easiest victims like all scams, they are going after those who are older, have bad credit, or even people who are desperate for money. These are the targets one way to avoid being a target is get off that list, I know that is a very tall order, but it is a step to take. These scams milk billions of dollars every year and put people in worse shape than they already are. So once again we see something here that happens they take advantage of the weak and leave them weaker. Mortgage scams and fraud has tripled since 2001 and I can only imagine it will continue to get worse. I am not sure if it is more prevalent than the internet scams we normally headline but hey they are out there.
Normally these scams are considered predatory lending which means they are deceptive, unfair or sometimes just blatant fraud. If you are shopping for a refinance chances are you will come into contact with someone using predatory lending tactics. However home buyers are also getting hit and with this market being a buyer’s market beware. I have experience with this as I was a licensed Mortgage Broker for a while and ran across so many people who had been tricked into loans that would probably cause them to lose the house they have lived in for years.
Protection
Make sure you educate yourself before you start looking for a loan, spend a little time learning how mortgages work and the various flavors of mortgage loans. You do not need to be an expert but you do need to know what to expect so that when you see something out of the ordinary you might have a chance to react. Always check out your lender on the BBB sites and on the Internet to see if any scam alerts or fraud topics are around them and read them. You must take them with a grain of salt as some are not always true but it’s best to know what is going on with the company you are working with.
Signs and Schemes
If a lender pursues your business too persistently or tries to rush you into close you should stay away, this is your house and your money you take the time you need. Most predatory lenders will solicit hard and contact you many time telling you they can cure your financial troubles in record time. This like every other scam is to get you going, if you notice all scams are the same. Make you feel like you need it now, promise something for nothing and once they feel they have you on the hook they want to land you quickly. These offers also are for a limited time and you will probably hear something like this “I talked to my boss and he talked to the lender they agreed to lower the interest rate if you will sign the documents today”. They do not want you to read the fine print and I strongly urge you to read every single line of every document before signing.
The bait and switch still exists as well, they will present you with favourable terms and then at closing the terms are different from described. You will find that the rates are higher, there are hidden fees, or other problems with your loan. Now when you see this get up and walk out remember this is your money and your house. Screw them you do not need that lender there are plenty more legit lenders that are looking for your business.
Some scams involve home improvement scams, you are solicited by a “contractor” who is working in the neighbourhood. They normally happen after you have inquired about home improvement loans or services, however some are random and just include door to door fishing. They will normally tell you they can finance the repairs with the company they work for. Once you agree you are on the hook the improvements are horrible and they will hit all types of fees and interest rates.
I actually had a contractor talking to me yesterday who asked me to file it under my home-owners and they will give a receipt claiming I had already met my deductible and continue. This is also fraud I told the contractor to leave my house and that I would find someone more reputable to work with.
The nastiest of all mortgage lending scams is aimed at the people who are distressed homeowners they are normally in foreclosure or close to it. They sell this scam as a rescue loan to bail you out, they will convince you to transfer the deed of the property to them while waiting for the loan to be approved. Once they take the deed they are gone. They will then record the homeowners payments as rent while they go out and attempt to refinance your loan and steal your equity. Sometimes they will even sell the house out from under you and evict you from the house, since they have the deed there is nothing you can really do about this.
If a lender is willing to bend the rules or fudge numbers stay the hell away. These tactics will normally lead to you being approved for a loan you can not afford and will lead down the path of no return. This to me is a large problem with the Alt-A and subprime loans. They lead to bubbles which leads to where we are today.
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