You’ve probably heard about credit card scams, identify theft, and other forms of fraud. But did you know that mortgage scams are out there as well? Predatory lending has been more strictly regulated since the ’08 crash, but scammers are still out there preying on people. Engaging with these scammers means you could lose the down payment on your home or even worse, be subject to foreclosure. The good news is that there are easy ways to identify mortgage fraud. Here are 3 common mortgage scams that are active today, and how to avoid them.
1. Leaseback Scheme Scam
According to U.S. News, one common mortgage scam is the “leaseback scheme” where scammers prey on homeowners who are at risk of foreclosure and pretend to be someone who will help them keep their home. They do this by posing as a legitimate service and getting the homeowner to send payments to them. Instead of putting the money towards the home they simply pocket the money until your home gets foreclosed on.
How to avoid this scam: Always work directly with your loan company and make sure you inform them of your financial difficulties. They understand your situation and are in the best position to help you.
2. Down Payment Scam
Another mortgage scam is known as the “down payment”scam. According to the Consumer Financial Protection Bureau, these scammers will send you an email pretending to be your mortgage broker. In the email, there will be instructions on how to wire money that will go towards your down payment, but in reality, the money will be deposited into the scammer’s account.
How to avoid this scam: Contact your loan officer directly via email or phone before you take any action. Verify with your loan officer on how you should be sending any financial information or funds.
3. Upfront Fees Scam
Licensed mortgage lenders are required to disclose all fees and costs according to bankrate.com. So you should be wary of any “upfront fees”. Scammers will often charge processing fees right off the bat, but not actually provide any services. Predatory lenders will also ask for payments in hopes that you will pay and not ask what the payment is for.
How to avoid this scam: Always ask for the reason for any upfront fees in writing. A good lender will always walk you through your loan fees schedule. They will be patient and explain what you’re paying for and why.
It Pays to Protect Yourself
Many scammers know how to cover their tracks by depositing money into offshore accounts. Once the money is lost, it’s usually impossible to get back. The best way to avoid mortgage scams, or scams in general, is to not fall for them in the first place. Getting your money back after you’ve been tricked is far harder than to just identify scams before they happen.
You should be wary about any email, text, or call you get about your mortgage pretending to be urgent, especially if it’s asking for money or a signature. Scammers often take advantage of anxious behavior, which will cause victims to be blind to red flags that they otherwise would have seen if they were calm. Don’t respond to an email, since it might be fraudulent. Pick up the phone and call your loan officer directly. A professional loan officer should be informative and tell you about required actions well in advance.
Lastly, all licensed loan officers will have an NMLS number. If they don’t have one, it’s likely that they are a scammer. If you’re not sure about a mortgage service or product, ask for an NMLS number which you can verify here: https://www.nmlsconsumeraccess.org/