Mortgage Loan Scams

What is mortgage scam?

Mortgage is one of the biggest loan that one takes to buy home or any real estate property. As it involves a big amount of money it becomes obvious that every one wants a hassle free deal. But there is some unethical business tactics happens in relation to this loan dealing time by time that one needs to avoid. These are known as scams and can be done by outsiders or the related financial institutions that are subject to provide loan. Some of the most common complaints of consumers are that the lender refused to provide the loan amount at the final stage of the process though mortgage banker association has approved it. Again there are some outsiders who try to steal confidential information of different borrowers. However, in both type of scams borrowers face a huge amount of monetary loss. To provide justice to consumers, there are certain laws to take action against the culprit.

What are the general purposes of mortgage scams?

Scammers usually use different methods to harm your personal credit report by offering monetary loss. Usually their intentions are to gain money by hacking your account details or miss guiding you to a fake websites that have no such mortgage dealings. Some of the most common scamming advertisements are:

• There are some scammers who guarantee to fix your credit within 24hrs. They promise to solve all your credit problems by taking some money. But you need to understand one thing that fixing credit is a long process cannot solve within few days, no matter how much money you can offer.

• Some time you can come across some websites promising no interest rate on your mortgage loan. You can also get some invitation emails from these types of sites. Though these websites looks very genuine like any other official sites but can be dangerous as their sole aim is to steal your personal information.

• Completely elimination of your mortgage within a small period of time. This is one of the most provoking scam comes through mail suggesting some loop holes in mortgage law that one can use to eliminate the mortgage. But in real there are no such conditions to help you. So beware of from this scam.

• Sometimes you will get information that the bank or institution dealing your mortgage business is bought by a new bank; so you have to send your monthly mortgage payment to the mentioned new account or to a new lender. As the mails looks very genuine like the original sites, its common to get trapped with this. So it’s advisable not to respond to these mails.

So it becomes important for any consumer not to respond to these false mails. If you have any queries regarding the changes of mortgage terms and conditions or the address of the lenders, it is advisable to contact the original lender. If you find yourself victimized then take the help of some specific mortgage laws.

The above-mentioned scam cases can be confined to the outsiders but there are certain scams that one comes across at the time of loan processing. Your lender generally traps these kinds equity loan scam. These are like equity stripping, hidden loan terms, loan flipping, extra insurance buying, service abuse etc.

Equity Stripping Scam – You don’t have enough money for the monthly payment and you have built up the equity in your home. But in this case a lender can encourage you to get a loan even he can approve your loan application. But as soon as you fall behind the monthly payment, he can take your home and also equity.

Hidden Loan Terms – If you fall behind the monthly mortgage payment you have to face foreclosure. But in this case another lender can offer you refinancing your mortgage payment with lower monthly payment. Here you have to only pay the interest and the principal loan amount have to pay in a lump sum at the end of the term. But here if you did not pay the principal amount or the balloon payment you may face foreclosure or loss the home.

Home Renovation Scam – Sometimes a contractor comes to you and offers some modification in your home with a reasonable price. Then the contractor says to arrange financing by a lender if you can’t afford. You agree with this and works begins but at the middle of the work process the contractor forces you to sign some paper otherwise he will leave the work unfinished. You sign those papers in hurry and later you came to know that those were home equity loan papers with high interest rate and fees. Again the renovation work done by the contractor may be not your expectation or remain incomplete. So stay away from these types of deals.

Signing over your deed: Also means signing over your mortgage. This can happen to anyone else when he/she faces difficulties in paying mortgage payment. In this circumstance your lender may threaten you for foreclosure. But another lender comes with a deal for refinancing your mortgage but before doing this he says you to transfer your property in his name as a temporary measure to avoid foreclosure. Later you find that no refinance money comes to you and legally the lender becomes the owner of your home. He can sell or treat as a security to his loan. Now as earlier you have to pay mortgage payment and that to the lender as rent. As soon as your payment becomes late, you can be thrown out of your home.

Mortgage Service Abuses: After getting a mortgage some exploitive lenders may charge you high monthly payment with some extra taxes, property insurance, additional fees, legal fees and some unexplained late fees. This can raise the payment amount than you actually owe. Lenders also provide no proper account details for these.

Extra Packages: Sometimes you find a mortgage suitable to your budget and signed all the required documents. But the lender comes to you with some extra documents like credit insurance and other benefits, which are not your necessary needs. But the lender tells that these come with the deal and you have forgot to sign. Also does not mention how much extra money you have to pay for these packages. If you refuse to sign, then lender tells you to again fill up all the forms which may takes some few days. Here you may fear to loss the deal and therefore signed but that may cost more.

How to protect yourself?

There are many financial institutions, lenders and real estate professionals ready to provide assistance in getting loans for buying home. But to be a smart consumer, you need to understand the total buying process. Here are certain points that you need to keep in mind before finalizing the deal with any mortgage lender.

• Meet several real estate lenders and ask for their terms and conditions in paper and compare these to find the best one.
• Find the existing prices of the homes in your neighbors.
• Hire a property inspector to access the value of the home by inspecting and find out the repairing costs if any.
• Don’t agree to mortgage loan if you don’t have enough monthly income as mortgage payment.
• Provide accurate information regarding your employment, income and down payment.
• Sign each document after reading it carefully and don’t sign any blank document or fill after signing it.
• Don’t accept any terms that include some extra services like credit insurance or tax benefits that are not in your use.