How to Spot a Mortgage Scam

Posted on September 09 By Francine Huff

The headlines keep rolling in highlighting the real and growing problem of mortgage fraud. Alleged or convicted perpetrators of mortgage fraud recently have included a pastor, a former Dallas Cowboy, real estate agents, brokers and many others. So how can you spot a mortgage fraud scheme?

  1. If it sounds too good to be true, it probably is. People who promise to help you no matter what your situation, may be running a con. In some cases, shady mortgage counselors may charge an upfront fee to help negotiate with the lender to save your home if you are behind on mortgage payments. They may promise to get your mortgage loan modified but actually end up taking the money and disappearing. If you fall for this scam you could end up further behind on your payments, leading to foreclosure.
  2. Never sign papers that you haven't read. Mortgage documents can be confusing so have an attorney review any deal you are considering. Some scam artists will make you think you're signing papers that help you get caught up on a mortgage, but their real intent is to get you to sign over the deed to your home or strip you of any remaining equity.
  3. Don't fall for schemes that require you to sign over the deed and then rent your home for a period of time in order to buy it back. In many cases, the homeowner is unable to meet the terms of such a deal and ends up losing his home.
  4. Another way to spot a scam brewing is if you are approached by strangers who offer to help save your home. They may contact you by phone, mail, email or even show up on your doorstep. Many of them are smooth talkers who will listen with a sympathetic ear and convince you they are on your side while plotting the best way to fleece you.
  5. Never participate in schemes that require you to buy a home you won't actually live in. Scam artist enlist "straw buyers" to purchase properties that get resold to another group of buyers. The fraudsters profit off the deal when the second set of buyers get much higher mortgages than the original loans.
The best way to protect yourself is to never do business with people you don't know and haven't contacted first. If you need help with saving your home, contact your mortgage lender or a legitimate housing counselor. You can find a HUD- approved counseling agency here.

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