Mortgage fraud is rising, with criminals devising new schemes to separate people from their money. A difficult economy has placed many people in dire straits with their mortgages. People who are trying to avoid losing their homes often become desperate, causing them to explore creative financing options. Fraud may hide within many of these creative options. If consumers are not aware of the dangers, they can fall victim to deceit and misrepresentation. Before you become involved in any transaction, get out your calculator and crunch the numbers. It's also important to consult an attorney before you sign any contracts.
Some companies have begun offering consumers foreclosure rescue services. With this scenario, the company promises to adjust the loan to reduce monthly payments. Often these companies offer guarantees and they represent themselves to be affiliated with the government. After enticing consumers to purchase their services, the companies promise to negotiate new terms for distressed homeowners. Instead, the companies do not deliver any assistance, often leaving homeowners in worse financial situations.
Lenders that engage in hard-sell lending tactics, without providing details about all the loan terms, may be engaging in predatory lending. Predatory lending often begins with a telemarketing phone call to offer the loan. Consumers may receive loan offers without credit checks and with little information about the terms of contracts. To avoid predatory lending, have an attorney review any contract prior to signing it.
Identity theft can occur in numerous ways. Anytime your personal information is compromised, you can be at risk for identity theft. Criminals may search through trash to find banking information. Computer viruses can also infiltrate people's computer hard drives to harvest personal information. To reduce the risk of identity fraud, safeguard your personal data carefully. Do not give your credit card number out to people who call you with offers. Never transmit personal or financial information via email, because email communication is not secure. Monitor bank accounts carefully, and report suspicious activity immediately.
Appraisal fraud often works in conjunction with house flipping. Dishonest appraisers can engage in appraisal fraud. In this situation, the appraiser and the dishonest buyer work in collusion to misrepresent the value of the house to the lender. Appraisal fraud may also occur in refinancing or second mortgage situations to misrepresent the value of the property.
Upfront fee scams involve the consumer sending a processing fee along with a long application. After consumers pay the processing fee, they do not receive a loan or credit card. Another upfront fee scam involves prizes and contests. A company will contact prize winners with news of a prize, but the winners cannot collect the prize until they pay an upfront fee. After paying the fee, the winners never collect their prizes.
Unscrupulous lenders may engage in a lease-back/repurchase scam designed to prey on homeowners who are in financial trouble. In this situation, the lender offers the homeowner an opportunity to sign over a deed with the promise of the lender leasing back the property to enable continued occupancy. Typically, the company will then charge a prohibitively high rent to force the victim out of the house. Then, the company will resell the property for a profit.
Property flipping can be an effective way to earn money. Property flipping involves a person purchasing a house and then reselling it at a higher price to earn a profit. Illegalities can occur if a property flipper attempts to misrepresent the value of the property. Making false statements to a lender about the value of the property would be fraudulent.
The straw buyer scam involves criminals searching for consumers with good credit to use them to obtain financing. The criminals convince these consumers to obtain mortgages for properties. Straw buyers may be promised compensation for this involvement. Sometimes straw buyers do not even realize that their names have been used to obtain financing. Straw buying scams often work in conjunction with other types of mortgage fraud such as property flipping and appraisal fraud.
There are a number of sources you can read to find out about recent white collar mortgage scam and fraud cases.
If you believe you have been a victim, you can file a complaint with the following regulatory bodies.