Times are tough for everyone nowadays with home values plummeting, job cuts, and the stock market fluctuating at degrees of absurdity; the last thing a homeowner needs is to be tricked or scammed by a crook. The newest trend in criminal activity toward homeowners is mortgage scam and tricks. This crime is devious, deceptive, and preys on the weak and vulnerable. So, as a homeowner or a potential homeowner, you have to be careful and be vigilant, especially of these top 10 common tricks mortgage servicers can use to take advantage of you so that you can steer clear.
1. The Bait And Switch Technique
Lenders to avoid are those who are fond of promising low-interest rates to consumers during the initial negotiations. Meanwhile, the consumer might later find out that the interest is actually much higher than originally discussed, or the rate stays the same but there are hidden charges that were not disclosed before closing.
2. Equity Stripping or “Leaseback Scheme”
Another situation you should try your best to avoid are mortgage scammers who claim to save you from a “home you can’t afford” by offering to refinance your mortgage or buy your property and allow you to rent it back. Commonly, homeowners who fall victim lose their home because of this scam.
3. Illegal Flipping
The practice of flipping houses is associated with mortgage scams and has taken on a negative view of the housing industry. Many people have made a fortune by “flipping” homes and selling them for thousands after fixing it up.
4. Loan Flipping
Also, some home lenders are also taking the same approach of flipping houses for a profit. Just like leaseback schemes, loan flipping also targets homeowners who aren’t doing well financially with the aim of draining that equity from the home.
5. Phantom Help
Some government-sponsored loan modification programs are built for reversing housing market current situation—so many, in fact, that it’s nearly impossible to keep track of what they are. Mortgage scam artists will rely on this fact when they create fictional loan mod programs and dupe struggling homeowners into “refinancing” with them. Lenders pursue borrowers very aggressively and push the customer to close the loan very quickly before the borrower has time to get informed or read the fine print.
6. Service Charges, False Fees or Penalties
In some cases, there are some fees homeowners are supposed to pay, which they may not know about until closing. However, this make homeowners opened to exploitation and fall victim to claims that they have not paid these fees or charges. Fraudulent mortgage services will keep sending you notice time to time for various fees and associated penalties. So, always inquire about what you’re paying for directly from your lender from a verifiable source (such as the phone number on your mortgage bill).
7. Trial Modification Agreement Breaches
A trial modification agreement is a pact between a mortgage servicer and the homeowner to change the terms of the mortgage permanently. This is usually done in case the homeowner wants to change the monthly mortgage installments so that it is more affordable. A predatory loan company may offer to this agreement (when they are not authorized to) and accept your payments, or may claim you have breached your contract and now owe more money that they attempt to collect.
8. No closing costs
“No closing costs” is usually a red flag that something is not on the up and up with this offer. If there’s one thing you can expect when you get a mortgage, is fees – lots of them.
9. Quick close mortgages
You might be attracted by a lender’s extremely low mortgage rate, but beware the deal if it comes with a “quick close” condition. Closing quickly is a red flag of predatory lending.