Buying a home isn’t easy – you have to put together a down payment, get through the whole mortgage application process, actually find the house, and close the deal. Then you have to pay your mortgage every month. You’ve worked hard to purchase your home and you’re working hard to continue to pay it off. Unfortunately, there are some dishonest folks out there trying to separate you from your hard-earned money. Watch out for these mortgage fraud scams.
The Scam: A kind stranger, often with an official-sounding business name, will offer to take over your mortgage and lease your home back to you. They pay the mortgage, you pay the rent, and you stay in your home. It’s an attractive option for people who can’t keep up with the mortgage on their own due to financial difficulties. Of course, you have the option to repurchase the home at any time.
What Actually Happens: The scammer raises the rent prohibitively, evicts you, and then sells your home and pockets the cash.
The Red Flag: There are virtually no legitimate reasons to ask someone to sign over the deed to their home. If someone asks you to hand them the deed, run the other way.
Refinance or “Bait-And-Switch” Scams
The Scam: You’re struggling to make your mortgage payments or maybe you’ve already fallen behind. An individual or company offers to refinance your mortgage to make the payments more manageable. They bring you a set of documents (sometimes called “foreclosure rescue”) documents to sign – they say that these documents will bring your mortgage up to date and get you better loan terms. Now you’re no longer behind on payments and your payments going forward are lower.
What Actually Happens: Those documents are a deed transfer – they’re counting on you not reading them. They can sell the home and pocket the cash, leaving you with a mortgage loan and no home.
The Red Flag: There are a couple of things to watch out for here. First, you should always make sure to work with a recognized lender – do some research on the person or company that offers to refinance your loan. Second, you should read every word of every document you sign, especially if it pertains to your home. If you don’t understand something, ask about it. Scammers will brush off your questions, change the subject, or pressure you to sign anyway.
Partial Interest Bankruptcy Scams
The Scam: A “foreclosure expert” or “mortgage relief expert” offers to help you keep your home out of foreclosure. All you have to do is transfer partial ownership (sometimes as low as 1%, but usually closer to the range of 10%) of your home to someone else and pay a monthly fee for the foreclosure relief services.
What Actually Happens: The partial ownership is transferred to a person or company that immediately files bankruptcy. The bankruptcy filing triggers the automatic stay, a legal provision that stops all collection actions – including the foreclosure of your home, since that other party has partial ownership. The collection calls and foreclosure notices stop, so you think the foreclosure relief services are working and you keep paying your monthly fee. In some cases, that partial ownership may be split up or transferred to a number of different entities that keep filing bankruptcies to delay the foreclosure as long as possible. What you don’t know is that you’re still responsible for all of your back and current mortgage payments and your home is still facing foreclosure as soon as the bankruptcy filings clear up – and now you’re out the cash you’ve been paying the scammers every month.
The Red Flag: No one should ask you to transfer interest in your home – there’s basically no legitimate reason for it.
Advance Fee Or “Phantom Help” Scams
The Scam: A company contacts you offering help with refinancing your mortgage or keeping your home out of foreclosure. They’ll negotiate with the bank and make sure you get to keep your home. All you have to do is pay them a reasonable fee and they’ll save your home.
What Actually Happens: Nothing. You pay them the fee and they don’t do a thing about your mortgage. Meanwhile, you’re losing time to pursue other options as you fall farther and farther behind on your loan.
The Red Flag: Never pay an up-front fee for financial help. All reputable organizations make their fees clear up front but don’t make you pay until the end of the process.
General Red Flags
These are just a few of the biggest and most common types of mortgage fraud scams, but enterprising fraudsters are always coming up with more. In general, here are some things you should watch out for:
- Demanding an up-front fee – no legitimate organization takes fees up front
- Unsolicited offers – they’re targeting you and already know that you’re in trouble with your mortgage
- Advising you to stop making your mortgage payments – they can’t actually stop foreclosure, so that just leaves you farther behind
- Asking for full or partial ownership of your home – no legitimate organization requires that
- Asking you to sign a document that still has blank spaces – they can fill in whatever they want once you’ve signed
Of course, not all mortgage refinance and foreclosure rescue programs are scams. If you are struggling with your mortgage and looking for help, there are ways to keep yourself safe from mortgage fraud:
- Do your research – get online and check out the names of any individuals or companies you’re considering working with to learn if there have been complaints about them and if they’re legitimate
- Contact the Better Business Bureau or the Consumer Financial Protection Bureau – ask about the business to make sure it’s legitimate
- Shop around – check out multiple options to make sure you’re getting the best deal
We Can Help
If you’re struggling with your mortgage loan, you’re probably frustrated and looking for options to deal with your debt. The Mortgage Warriors may be able to help. Contact us today for a free case evaluation to learn about your options for saving your home and managing your mortgage debt.