Scams are quite common in the present times. They are prevalent in every field and mortgage industry is no exception. Most of the mortgage scams tend to prey those homeowners, who don't have adequate knowledge about the mortgage industry. Moreover, the mortgage scammers usually target cash-trapped homeowners and promise to save them from foreclosure. However, the prime intention of the scammers is to steal the remaining home equity or some cash.
What are the most common mortgage scams?
The 4 most common mortgage scams are discussed in the following lines.
1. Bait and switch: In this scheme, the mortgage scammers pretend to be legitimate housing counselors who are equipped with legal documents. Actually, the homeowner is made to sign forged documents as a result of which, the scammers get home ownership.
2. Bankruptcy ploy: A scammer pretends to be an attorney and advices the homeowner that he/she can save his/her house by filing bankruptcy. Actually, the scammer pockets the fees that he/she charges for filing bankruptcy.
3. Equity Stripping: It is another quite common scam wherein the fraudsters convince the homeowners to transfer the title with the promise that the owners can stay as a renter and can buy back when their financial condition improve. However, the homeowners mostly fail to buy back and ultimately lose the home. This scam is also referred to as 'Bailout' mortgage scam.
4. Phantom Help: Often, mortgage scammers charge high fees for making some basic phone calls that the homeowners can very well do themselves. The scammer also insists that the homeowner doesn't pay heed to notices that the lenders send. This ultimately leads to foreclosure.
Apart from the ones mentioned above, there are some other mortgage scams like refinancing loan scams, internet and phone scams, balloon payment scam and many more.
How can you avoid falling prey to mortgage scams?
You can avoid being a victim of mortgage scams if you follow the do's and don'ts that are discussed below.
Do's:
• Learn the foreclosure laws in your state.
• Whenever you experience a financial hardship, contact your lender and explain your financial situation.
• Contact a counseling agency. Make sure that the counselor is certified by HUD (Department of Housing and Urban Development).
• Do make sure that you’re in foreclosure. If you miss your mortgage payments, then you'll receive a 'deficiency notice'.
Don'ts:
• If you face financial hardship, don't ignore it as it'll become worse.
• Don't ever sign a contract under pressure. Always review it properly and take help of a professional if required.
• Don't pay to anyone else other than your lender.
• Do not enter into verbal agreements; always get everything in writing.
One of the best ways to avoid falling prey to mortgage scams is to educate yourself about the different types of mortgage loans and how they function. Before you start shopping for a home loan, invest some time to know about its basics. It will also help you to identify the mortgage scammers and avoid being a victim of such fraudulent schemes.
