Mortgage Scams -How to Avoid Them?

Mortgage scams target unsuspecting homebuyers and homeowners. These scams can lead to financial loss and emotional distress. Avoid falling victim to these schemes by staying informed and vigilant. Here are essential tips to protect yourself from mortgage scams.

Recognize Common Mortgage Scams

Understanding common mortgage scams can help you stay alert. Look out for foreclosure rescue scams, loan modification scams, and reverse mortgage scams. Foreclosure rescue scams promise to save your home from foreclosure for a fee but fail to deliver any real help. Loan modification scams offer to negotiate better loan terms for you, often asking for large upfront fees and then disappearing. Reverse mortgage scams target seniors, tricking them into signing away their home equity.

Verify Legitimacy

Always verify the legitimacy of lenders and brokers. Check their licenses through the Nationwide Mortgage Licensing System (NMLS). A legitimate mortgage professional will have a verifiable NMLS ID. Verify this ID by visiting the NMLS Consumer Access website. Additionally, look for reviews and ratings from other clients. A lack of information or negative reviews can be a red flag.

Mortgage Scams – Avoid Upfront Fees

Legitimate lenders and brokers will not ask for large upfront fees. Scammers often demand money before providing any services. Never pay fees upfront without verifying the service’s legitimacy. Be especially wary of high-pressure tactics urging you to pay immediately. A legitimate professional will provide services and ask for payment after delivering results.

Be Cautious with Personal Information

Protect your personal information. Scammers often ask for sensitive details like Social Security numbers or bank account information. Share such information only with trusted professionals. Providing personal information too soon can lead to identity theft. Always verify the identity of the person requesting your details before sharing anything.

Understand the Process

Educate yourself about the mortgage process. Knowledge is your best defense against scams. Understand each step, from application to closing, to spot irregularities. Familiarize yourself with standard practices and timelines in the mortgage industry. This knowledge will help you recognize when something seems off or too good to be true.

Read Before Signing

Read all documents thoroughly before signing. Scammers often hide fraudulent terms in complex paperwork. If you don’t understand something, ask questions or seek legal advice. Never sign blank documents or forms with missing information. Ensure all terms and conditions are clear and acceptable before proceeding.

Use Trusted Professionals

Work with trusted real estate agents, lenders, and lawyers. Recommendations from friends and family can help you find reliable professionals. Check their credentials and experience. A trusted professional will have a track record of successful transactions and satisfied clients. Building a network of reliable professionals can provide you with a safety net against scams.

Report Suspicious Activity

Report suspicious activity immediately. If you suspect a scam, contact the Consumer Financial Protection Bureau (CFPB) or the Federal Trade Commission (FTC). Reporting helps prevent others from becoming victims. Provide detailed information about the scam and the individuals involved. Your report can aid in the investigation and prosecution of scammers.

Educate Yourself about Mortgage Scams

Stay informed about the latest scams. Regularly check resources like the CFPB and FTC websites for updates on common and emerging scams. Participate in community seminars or workshops about mortgage fraud. Knowledge is power; the more you know, the better you can protect yourself and others.

Protect Your Investment

Your home is a significant investment. Protect it by staying vigilant and informed. Taking these precautions can help you avoid mortgage scams and ensure a safe and successful home-buying experience. Regularly review your mortgage statements and financial records for any discrepancies. Promptly address any issues to safeguard your investment.

Steps to Take When Facing Mortgage Scams

If you encounter a suspicious mortgage offer, contact your state attorney general’s office. They will ask for details and copies of any documents, initiate an investigation, and update you on their findings. If you believe you’ve fallen victim to a mortgage scam, report it to your local police and inform your bank immediately if you’ve sent money or shared account information. Additionally, seek legal advice; if you don’t have an attorney, contact your local legal aid office, which may offer assistance for free or on a sliding scale based on your income.

Conclusion

Mortgage scams are prevalent, but you can protect yourself with knowledge and vigilance. By recognizing scams, verifying legitimacy, avoiding upfront fees, protecting personal information, understanding the process, reading before signing, using trusted professionals, reporting suspicious activity, and staying informed, you can avoid mortgage scams. Protect your investment and enjoy a secure home-buying experience. Stay safe and informed to avoid falling victim to mortgage scams. For more information and resources, visit the CFPB and FTC websites​.

Recognizing Mortgage Scams


- Too-Good-to-Be-True Offers: Be wary if interest rates and loan terms are significantly better than those offered by other lenders. If it seems too good to be true, it probably is.
- Dangerous Loan Features: Responsible lenders typically avoid loans with risky features such as balloon payments or interest-only repayment periods. Be cautious of prepayment penalties as well.
- No Financial Assessment: Legitimate lenders will always review your credit history and request proof of income, assets, and debts. Avoid lenders who skip this step.
- Missing Written Agreements: Lenders should provide preapproval letters and written loan estimates that match their verbal promises. Avoid those who hesitate to provide documents.
- Incomplete Documents: Never sign documents with blank lines or spaces. Scammers can fill these in later with unfavorable terms.
- Excessive Closing Costs: Closing costs usually range from 2% to 5% of a home's price, according to Freddie Mac. Question lenders who charge significantly more than this range.
- Advice to Cut Off Communication: Legitimate service providers won't discourage you from communicating with your lender. Be wary if you're told to cut off contact.
- Requests to Change Payment Address: Scammers might instruct you to stop paying your mortgage or to send payments to a new address. Always verify such changes with your lender.
- Upfront Charges: You should never pay upfront fees for information about your options or to start negotiations with your mortgage servicer.
- False Guarantees: Be cautious of service providers who guarantee that you can stay in your home or promise to erase your debts. Legitimate providers won't make such claims.