The mortgage market is going through a tough time; foreclosures are occurring more than ever, housing prices continue to fall, and lost jobs are still making front-page news. It is imperative that the homeowner or potential buyer stay informed in this changing environment.
Below are just a few of the fraudulent mortgage practices that are rapidly rising in volume. An awareness of the way mortgage frauds work will assist you in staying ahead of the mortgage fraud game and off the victim's list.
Foreclosure Fraud and Equity Skimming Fraud
With thousands of homes going into foreclosure every day, foreclosure fraud is unfortunately an easy crime to commit. The offender committing mortgage fraud, after going through county records, locates homes that have received foreclosure letters. He will contact a homeowner and 'generously' offers her a way out of her mortgage problems: he offers to pay her debt if the intended victim will simply sign over the deed to her home.
An extension of the foreclosure fraud is equity skimming. The fraudulent lender persuades the unwitting homeowner to sign over the title to her home and then pay him rent. This 'helpful' lender then guarantees the homeowner that the house can be repurchased at a higher value later on. That will not happen, of course, because the scam artists will quickly take out a second mortgage on the untouched equity.
In both instances he will let the mortgage default, leaving the mortgage victim homeless.
The lesson: never sign a mortgage document without a real estate attorney present. A reputable mortgage lender will always have an attorney handle these agreements. If struggling to make mortgage payments, talk to the mortgage bank first. Never trust unsolicited phone calls, emails, or letters offering to help with mortgage payments.
Buyer Beware
If you choose to purchase a home in this market, utilize the Internet to research property, sellers, and lenders. Most counties have the tax value, recent sales, and pertinent information about local properties on their website. Simply type in the county name and look for their GeoData Explorer. These days almost all realtors and lenders have a website. Look at your chosen realtor's site carefully and then cross check with the Better Business Bureau. Sellers, lenders, realtors, and appraisers have been known to work together to commit fraud. For example, the appraiser may inflate the appraised value of the home in order for the seller to make more proceeds at the closing table, leaving the unsuspecting buyer with a home difficult to refinance afterward.
Knowledge is the key to making sound financial decisions and avoiding mortgage and foreclosure fraud.
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