Warning: It’s Easy to Be Duped by a Mortgage Fraud

Warning: It’s Easy to Be Duped by a Mortgage Fraud

A foreclosure occurs when a bank seizes a property because the homeowner can’t keep up with mortgage payments. As a result, he or she abandons the home or voluntarily deeds it to the bank.

A family may not be able to pay their mortgage for many reasons. The homeowner may have lost their job because they quit, got fired, or were laid lay-off. They may have suffered a serious health crisis that made it impossible to work. And they may have incurred excessive debt, gone through a divorce, or run out of money after paying maintenance costs.

Yet another reason for the loss of a home is because a homeowner becomes the victim of a mortgage fraud; tricked into buying a home they can’t afford based on how much they are earning or asked to sign documents they don’t fully understand.

If you’re a victim of a scam, you can get help from a real estate lawyer familiar with mortgage and foreclosure issues. You can also file a complaint with the state attorney general, the Federal Trade Commission, and the Better Business Bureau.

Two Flavors of Mortgage Fraud

Fraud for profit or fraud for housing are two of the most common types of mortgage fraud.

Fraud for profit occurs when industry professionals, ranging from bank officers to loan originators, abuse the mortgage lending process to steal equity and cash from the lender or the homeowner. Industry professionals use their specialized knowledge to pull off these schemes.

Fraud for housing occurs when the borrower misrepresents their income and assets to acquire the house. They may either lie on their loan application or trick the appraiser into altering the value of the property.

Red Flags to Notice

For any illegal scheme to work, it requires the victim to be naïve. If you don’t know how things work–and may not even know that you don’t know–then your guard is down.

Education is the antidote to victimization. When you know what red flags to notice, you don’t get duped by appearances or what people say. You see behind their pretense and notice hidden agendas.

Red Flag #1: Paying an Advance Fee 

Be suspicious if you’re asked to pay an advanced fee by a third party. New regulations require banks and financial institutions to provide a single point of contact. If a third-party shows up to ask you for an advance fee, you’re being set up for a scam.

Red Flag #2: Transferring a Property Title

Never agree to transfer the title of your property. Your title, or deed, is a legal document that proves your ownership. If you relinquish your deed, then you’ve lost all legal control of the property.

Scammers will talk you into signing over a deed to expedite things. For instance, someone may ask you to sign a deed so that they can negotiate with the bank on your behalf to get you the best deal. When you do sign over the deed, then they get complete control of your property. You’ve given up ownership.

Red Flag #3: Signing an Incomplete Document

Read through all documents you sign, especially loan agreements, and avoid signing documents with missing fields. If a document has missing lines, these can later be filled in with incorrect information.  If you have any doubts about a document, ask an attorney to review it.

Red Flag #4: Pretending to be Affiliated with a Government Agency

Always make the effort to do a background check on any third parties claiming to be working on behalf of a government agency. To appear as legitimate representatives of a government agency, scammers resort to all sorts of tricks, including using fake logos, seals, and names. A government agency will not ask for advance fees nor guarantee anything.

By pretending to be kind, caring, thoughtful, and helpful, schemers win your trust and prey on your gullibility. A scam works because someone wins your trust through guile and pretense. Scammers also often use simple devices like testimonials, documented proof, and guarantees to prove something is authentic and resort to psychological tricks, like asking you to meet an artificial deadline.

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