Mortgage scams are on the rise. Every year, unsuspecting people lose their homes or money to mortgage scams. Few things are more heartbreaking than losing your life savings or dream home to a con artist who pretends to help you. The good news is that there are ways to educate yourself and dodge sketchy offers.
If you want to know how to identify a scam and protect yourself, check out these 10 tips to avoid mortgage loan scams.
What Are Mortgage Loan Scams?
While loan mortgage scams come in all shapes and sizes, here are some popular loan scam types to avoid:
Loan Modification or Refinance Scams
With this scam, a fraudulent agent contacts you and encourages you to stop making payments and cease contact with your regular lender. They promise to modify your current loan for a better rate if you send them payment upfront.
These scammers also charge you high fees upfront for services that are free or that you could easily access yourself.
Foreclosure Rescue Scams
Scammers capitalize on people’s genuine fear that they will lose their homes.
Scammers can also quickly scan public records to find homeowners to target. Then someone contacts you to warn you that the bank will foreclose on your home soon. They promise to fix your credit or save you from foreclosure if you act fast and – you guessed it – send them payments to prevent impending homelessness.
Instead, they will steal your money, your equity, or even your home.
Bankruptcy Foreclosure Scams
These scams threaten foreclosure unless you pay up. They might also tell you to file for bankruptcy to avoid making payments. Not only is this coercive advice, but it is a fast way to lose your home.
Equity Stripping Scams
Home equity means the difference between the mortgage you still owe and how much your house is worth.
Fraudsters use fear to convince you that the bank is about to foreclose. On the other hand, maybe you genuinely face foreclosure. In either scenario, scammers persuade you to sell your house to them. They buy it at a loss and rent it back to you for higher rates, stripping away any equity you might have earned.
Predatory Mortgage Lending
This type of fraud applies to any lender that coerces or deceives you into accepting a high-interest rate that makes it challenging to earn equity or ever pay off your home.
How Common Are Mortgage Loan Scams?
If you can get a loan, the chances are that you have encountered or avoided a loan scam already.
According to the U. S. Federal Bureau of Investigation, over 13,000 people fell victim to online real estate fraud in 2020 that cost more than $213 million in total. In addition, many people who do not report their losses out of shame or fear lose aggregate millions each year to loan fraud, wire fraud, and other real estate scams.
Within the past year, the U. S. Federal Trade Commission also reviewed 11,000 reports that involved debt management scams that included mortgage relief and foreclosure scams.
How Do Mortgage Loan Scams work?
Buying a home presents a vulnerable time for many homeowners. There is a lot of money involved and a lot of fine print to read.
Scammers thrust themselves into the buying or refinancing process by hacking sites or stealing payments and closing costs. In addition, fake loan officers, appraisers, mortgage brokers, or even attorneys can attempt to access lender or homeowner cash and equity fraudulently.
The Federal Bureau of Investigation defines this loan fraud type as mortgage fraud for profit. Keeping your financial information secure and interacting directly with your official lender are important ways to protect yourself from mortgage scams.
Here are the ten simple tips to avoid these mortgage loan scams.
1. Knowledge Is Power
Mortgages represent a common debt that most homeowners experience. Unfortunately, with mortgage scams on the rise in 2021, these rip-offs can look like fake mortgage relief programs, real relief programs that scammers falsely claim to represent, deceptive wire transfer demands, or bogus home foreclosure warnings.
Scammers target vulnerable people. They take advantage of their victim’s trust, ignorance, or desperation. Many scammers are very good at getting close to people and convincing them that their offer is legitimate.
A good rule of thumb to remember is that scammers typically (but not always) initiate contact with their intended victims. For example, mortgage loan scammers can target you through phone calls, social media, promotional flyers, or pop-up ads.
With a bit of effort, you can learn to identify loan scams that involve phishing attempts, fantastic offers, threats, or payment instructions that require you to go off-site. They may also use unusual methods such as wire transfers or gift cards. Most people can save everything if they check out legitimate offers with their lender first.
The best protection against scammers is to educate yourself.
2. If It’s Too Good To Be True (Or If You Feel Threatened)
Think critically when you receive an offer. If it sounds too good to be true, then it probably is. Examples include getting an amazing deal right away over the phone or within minutes online. A caller might also tell you that your poor credit history or missed payments do not matter since they will “make it work.”
Suppose the caller threatens foreclosure or exerts any other type of emotional or psychological blackmail, back away. Be firm. If they pressure you to send money in a way that circumvents the lender’s official channels, shut the conversation down. Legitimate lenders typically will not threaten you this way.
If you are behind on your payments or your mortgage is underwater, it is better to deal with your lender directly. They have an interest in helping you understand your options. A scammer does not care about you. They will milk your information for everything that they can get. Once you are onto them, they will ghost you, refuse to answer calls, and disappear with your money.
It is essential to remember that every scam looks like a scam. However, it might not look like a scam at first.
Some scams spoof legitimate websites or use similar language to a legitimate program. Check with your lender by calling the number on any statements or contacting them via their official website.
Since only your lender can offer you options that can genuinely reduce costs, it is always safest to reach out to them directly.
3. Don’t Respond to Offers
If you receive an email offer that you’re not sure is legitimate, do not answer it. Do not click on any links in the message. Instead, check the email address carefully. Even if it looks legitimate or appears to come from a respected institution, check for spelling errors or minor variations in the email address.
Do not send any payment info, even if the sender asks you to confirm this information to verify that you are a real person.
In general, if someone, not your regular lender, contacts you about a refinance, modification, or foreclosure offer, it is best to take it with a grain of salt. Click on the link to learn more.
4. Protect Your Information
Secure all your accounts with strong passwords that you do not give to anyone. Regularly update and protect your computer with a firewall and antivirus system.
5. Don’t Pay Advance Fees
By now, you probably know not to give out any information such as account numbers or social security numbers. But what if the mortgage representative tells you to wire transfer your “trial payment” as part of a loan “advance fee”?
Loan collectors collect “advance fees” taken from a loan applicant before the loan is finalized. If you are trying to get a homeowners’ loan and the agent asks you to pay an advance fee before securing the loan, consider this a red flag. You will likely lose your money and will not receive the promised loan.
Most mortgage laws discourage lenders from taking advance compensation since this tactic is straight out of a scammer’s playbook.
The bottom line: Do not make any advance payments.
Scammers cannot fleece you if you do not give them anything.
6. Don’t Sign Blank Documents
If you have discussed one of these offers to the point that the broker sends you documents, there is a good chance that fraudulent documents will have blank sections.
Never sign any document that has blank fields. It is like signing a blank check. Someone can put anything in the blank field. Once you have signed, you are on the hook for whatever anyone enters in the empty field.
Legitimate documents should not have blank fields. That is because valid lenders are required to disclose all aspects included in any contract or agreement that you sign.
If you see blank spaces in a document that someone asks you to sign, that is a big red flag that they are not upfront with you about what is involved.
7. Pay Your Lender Directly
Never send your payments by wire transfer. Instead, call the title company before you send any payment that is different from how you usually pay them.
Any request for payment that seems out of the ordinary or does not go directly to your lender is suspect.
It’s unfortunately common that people have sent monthly payments via a mortgage broker middleman, confident that the broker passed their payment on to the lender. Unfortunately, when they discovered that their payments had never arrived, their lender had foreclosed on them due to non-payment.
By paying your lender directly with a verified method, you will ensure that this never happens to you.
8. Never Transfer Your Property Title
Your property title is gold. It is the only thing that gives you the deed of ownership to your house. If you hand it over to a scammer, they have all the power and information to steal both your identity and your home.
9. Read the Fine Print
One of the worst things you can do is skip the fine print. If you are sent an offer, read every section. That way, you will know exactly what you’re signing. Better yet, ask your lender or an attorney to look it over before you sign anything.
If you ask for time to read the document or have an expert review it, you might flush out the scammer. However, the chances are that the scammer will try to pressure you into signing it right away. If you stand firm, they are likely to run for the hills.
10. Check with Your Lender
If you are struggling to make payments, curious about any refinancing options, or concerned about a foreclosure report, get in touch with your lender immediately.
Do not use any contact information over the phone, sent via email, or contained in social media messages, mail flyers, unofficial sites, or pop-up ads.
The Bottom Line
Mortgage loan scams exist everywhere.
Fraudsters can disguise these scams as quick ways to get home loans, reduce mortgage payments, or offer incredible refinancing options.
By practicing critical thinking, learning to identify potential scams, dealing directly with your lender, and preserving your financial information, you can protect yourself and avoid mortgage loan scams in the future.
Image credit: [KAROLINA GRABOWSKA]