A slow economy creates the perfect environment for loan scams. Today, thousands of property owners become a victim of different types of mortgage frauds.
It is becoming quite alarming that con artists do not even need to look for victims — an article from ABC news says that potential victims are the ones reaching out to scammers through online searches. It doesn’t help that the slow economy creates the perfect environment for loan scams as well.
Mortgage – What Is It?
A mortgage is a loan obtained by property owners. It is legally binding – the lender will have the right to have legal claim against the home of the borrower once the borrower evades the terms of the note. In other words, the lender owns the property possessed by the borrower until the loan has been completely paid off.
Types of Mortgage Frauds
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- Predatory lending – Lenders engaging in hard-sell lending strategies, without giving details regarding the loan terms, might be engaging in this type of mortgage scam. Usually, this starts with a phone call to offer the loan. Consumers will then receive loan offers with little information about the contract’s terms and even without credit checks. To avoid becoming a victim of this scam, have a lawyer or mortgage consultant look through any contract before signing it
- Foreclose Rescue – Companies will offer consumers different foreclosure rescue services and promise to adjust the loan in order to reduce monthly payments. These companies will act as a liaison between the customer and the government after their services have been purchased. Supposedly, the companies will negotiate new terms for desperate homeowners; however, the companies won’t provide any assistance and will just leave the homeowners in huge financial trouble.
- Upfront Fee Scam – In this type of fraud, consumers will send their application along with a processing fee to the company. But after payment, consumers won’t receive a loan. Other cases of upfront fee scams will involve contests and prizes wherein a company contacts prize winners, telling them that they’ve won and they can only get their prize after giving an upfront fee. The truth is that the winners won’t be able to collect their prizes even after paying the fee.
- Lease-Back Scam – Homeowners who are in worse financial situations are the victims of this type of mortgage fraud. Lenders will offer them a great opportunity to sign over a deed and promise that they will lease back the property to homeowners. But lenders will charge a very high rental fee, which forces the homeowners out of the property. After that, lenders will resell the property for a higher profit.
A mortgage is usually the biggest single purchase that people make in their lifetime. As such, choosing the right mortgage lender is very crucial. Know the different scam signs so you can detect and avoid financial troubles in the future.