6 Common Mortgage
Scams
Scams are abundant in the world today and seem to be
seeping into every facet of business, and mortgage loans
are no exception. Most scams in the mortgage field tend
to prey home buyers and owners who aren’t overly
educated in the area. So here we will have a look at
how some of these mortgage scams work and their outcomes
so you know to be aware of them and do not fall into
their trap.
Internet and Phone Scams:
These scams are usually by advertising low interest
mortgage loan rates in the news paper or on the internet
and even sometimes under a trusted company names. The
way this works is by having people who are seeking a
mortgage loan replying to an ad, either by phone or
by internet forms. They then ask for your personal information
like your account numbers and your social security number.
These loans are instantly approved and the borrower
usually goes on to faxing documents and sending wire
transfer payments without ever meeting the lender in
person. Usually the result of these scams is that you
lose your money, have no loan and your personal information
is either sold or your identity is then stolen.
Refinancing Loans Scams:
There are quite a few refinancing loan scams out there,
many times these are focused toward the borrower who
is in need of money. Usually you are left in greater
debt and even have the possibility of losing your home.
Some of these types of scams are:
Equity Stripping Scams:
These scams usually arise when your mortgage lender
approaches you and tries talking you into taking out
a loan, because you need the money. They usually know
that you can not afford the repayments but will encourage
you to do so anyway, even if it means dodging up some
of the loans forms so it will get approved. The reason
they do this ‘encouraging’ while knowing
you can not afford it, is to foreclose on your house
as soon as you miss a payment.
Loan Flipping Scams:
These scams are usually done after you have been paying
your mortgage off for a while and the loan lender approaches
you to refinance your loan, telling you that you can
have a little bit of extra cash in your pocket. Once
you have accepted, a few months later the lender will
approach you again, this time offering another refinancing
deal so you can get even more cash. This may sound good
at first, but in the end you are paying more for your
loan, are getting charged extra fees, points and even
a prepayment penalty as well as a higher interest rate.
Usually the more times you are talked into refinancing,
the more you’re getting in over your head in the
payments and the closer the possibility will be of losing
your home.
Balloon Payment Scam:
This scam is usually done when you no longer can keep
up with the payments on your mortgage and you are approached
by the lender with the offer of refinancing. They will
tell you, if you refinance, you will pay less on your
monthly repayments. Most times the reason for the lower
repayments is that you are only paying the interest
on the loan and after the term is up you have to pay
the whole loan in one lump sum or balloon payment. This
usually leads to you being unable to pay the whole loan
on the due date and this leads to foreclosure and the
loss of your home.
Mortgage Elimination Scams:
These scams are usually pin pointed at home owners who
are having a hard time repaying their mortgage. Ads
are often used in this type of scam, enticing home owners
to hire this particular mortgage company and be rid
of all mortgage payments. Usually what happens is that
you pay out a fee to get the ball rolling on your mortgage
elimination, then process a heap of fraud forms against
the lender and file phony loan applications. Usually
the only outcome is that you are making matters worse
and even committing criminal acts, without even knowing
it, as well as many other factors that come into it.
There are numerous other scams out there in the mortgage
field, always be aware of who you are loaning through
and your loan agreements.
The best way to prevent being a victim of a mortgage
scam is by using your common sense. Apply in person
at a company you know you can trust. Don’t take
on more than you can chew. If you need to refinance
your loan make sure that you know exactly what and how
much you will be paying and how much your loan will
be after all new charges have been added. Never believe
in anything that seems too good to be true, because
most times it probably is.
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