With any type of loan, there is a possibility of running into a scam. It is quite unfortunate that home loans are not exempted from scams. It is very important in any financial situation to watch out for scams while dealing with any type of loan. You should be vigilant when you are dealing with a loan that is as sizeable and impactful as a home mortgage loan. Some of the potential ways to detect scams are listed below.
- The company insists on an up-front fee to secure loan modification or refinance options on your mortgage. This practice is illegal.
- The company reaches out, uninitiated by you, and tries to pressure you into using their home loan or refinance services. This scam is also known as predatory lending.
- The company reaches out, uninitiated by you, and claims to work for a government loan program.
- The company requests you stop paying a current mortgage you may have and begin a program with them instead.
There is an evolution in the scams being used by mortgage industries to defraud borrowers. Some of the most common home loan scams being used today are listed below.
- Short-Sale Scammers: What they do here is to try as much as they can to persuade you into using their services and they would promise that they can negotiate a quick and effective short-sale with your current lender. They also charge illegal fees. Always use a legitimate realtor if you want to reach a short-sale term with your lender.
- Forensic Loan Audit Scam: They make this assistance sound beneficial as possible but it is not legal. They will tell you an auditing company wants to try to monitor the inconsistencies and help review your mortgage so as to know if your loan can be granted. An up-front fee is always requested. Unfortunately, even if they find something, a mortgage lender is not under any obligation to change or re-write your loan terms. If you feel there is an error in your mortgage terms, or if you would like to see if your terms can be revised, it’s always best to work directly with your lender or utilize a lawyer if necessary.
- Up-Front Fee Mortgage Counselling or Foreclosure Assistance: What the company does in this scam is to state that they can resolve any loan issues you may be facing. They will prevent or fix any pending foreclosure. An upfront fee is always requested and they will also advise you to stop communicating with your lender that they will be the ones to handle the rest. They can go as far as telling you to start making mortgage payments directly to them instead of your original lender. Once they have secured a certain amount of money from you, they will cease communication with you and disappear. If you need mortgage assistance, contact your lender or a licensed mortgage counsellor for help. Never make mortgage payments to anyone but your lender.
- Foreclosure Bankruptcy Scam: a promise of negotiating your mortgage with your lender to shop any current foreclosure threats or proceedings is made by the fraudulent company in this type of scam. They will charge you a fee, and unbeknownst to you, file for bankruptcy to stop any foreclosure proceedings. Unfortunately, using bankruptcy to stop foreclosure is only temporary and does not permanently stop the process; you could still lose your home. Plus, bankruptcy is something that will scar your credit report for years to come and should be avoided if at all possible. You can contact your lender directly to seek guidance on your local housing if you need assistance with foreclosure.