The Top Five Mortgage Fraud Scams to Avoid

Posted On September 14, 2016 In Recent News

Victims of mortgage fraud can have their lives upended with almost no warning. Scammers committing mortgage fraud may misrepresent the value of homes, create misleading contracts or hide fees in the fine print to rob homeowners. Fraudsters also create fake companies or contracts to scam people who are not fluent in English or familiar with real estate laws. New mortgage fraud techniques are constantly being created, and thousands of Texans are affected each year. This blog may help homeowners, people shopping for mortgages and family members identify common scams.

Have You Seen These Mortgage Fraud Scams?

1. Avoid loan modification scams: Scammers are most likely to target people who are in vulnerable financial situations. Fraudsters may promise homeowners that they can lower their monthly mortgage payments by negotiating with their lenders. These people will often charge up-front fees (which is illegal) or promise money-back guarantees for using their services. They may also claim to be affiliated with government programs like HAMP.
2. Avoid signing unfamiliar documents: Con artists may target homeowners with fake contracts. The elderly, disabled or foreign homeowners are most at risk for this type of scam. Scammers may pose as attorneys and convince homeowners behind on their mortgages to sign documents that can prevent foreclosure. In reality, homeowners are signing documents that surrender the titles to their homes.
3. Don’t rush signing the mortgage: Some homes have serious problems, such as structural damage or mold. This can not only lower the value of a home, but it can also make it uninhabitable. Take a detailed tour of the home first and ask as many questions as possible.
4. Do your homework: Scammers will sometimes attempt to sell properties they do not own. A title search will allow you to discover who owns properties. Some counties allow you to search for property title information at no cost. You should also research the person you are working with. Scammers sometimes pose as real-estate agents.
5. Avoid predatory lending: These lenders target people who have nowhere else to go by using high interest rates and hidden fees (such as penalties for paying off mortgages early). They may promise fixed rate mortgages at first, but then ask potential homeowners to sign adjustable rate mortgages. If the lender’s initial consultation or good faith estimates of fees and charges differ from what is in the final contract, you are likely dealing with a predatory lender. Predatory lenders also use deceptive ads that promise low fixed rates or low monthly payments. The purpose of these ads is to get people to sign contracts quickly while ignoring the fine print.

Mortgage Fraud Targets the Most Vulnerable

Scammers target the elderly, disabled or financially disadvantaged. People who are not fluent in English or familiar with Texas real estate laws are also frequently targeted. If you have family members who fall into one of these categories, it is important to help protect them from scams.

Having an attorney review your documents is another way that homeowners can avoid scams. In Texas, homeowners can nullify refinance and equity loans within three days of signing. Attorneys are also adept at discovering hidden fees in the fine print of mortgage contracts.

If you or someone you know is in the process of buying a home, one of our attorneys would be happy to make sure you are getting a fair deal.