Better Safe than Sorry How to Avoid Mortgage Frauds |
Posted: March 2, 2018 |
FBI stats on mortgage frauds show that you are not most likely victim of a mortgage fraud. Namely, the most cases of mortgage frauds in the US are perpetrated by borrowers against mortgage lenders (this is also why banks have rigorous background checks and due due diligence processes in place). Most of these frauds involve exaggerations, white lies or falsehoods on loan applications. However, a mortgage fraud is still possible – and you should be careful not to become a victim of a mortgage fraud even if they are usually unlikely. Some of the Usual Mortgage Fraudsters and FraudsRemember that the vast majority of people involved in mortgage lending are decent professionals with a goal of helping you get a good deal, but you should always be cautious. FBI provides a list over professionals frequently involved in mortgage frauds (in no particular order): 1) Mortgage brokers 2) Bank officers 3) Appraisers 4) Attorneys 5) Loan originators 6) Other industry professionals Some of the most usual frauds are equity stripping, refinance deals, foreclosure rescue schemes, reverse mortgage fraud and loan modification schemes. Equity Stripping involves lenders who get you lower mortgage rate and payment, but add very high costs to the loan without telling you this. They increase your mortgage balance, and many homeowners don't even notice this because the fees come out of their home equity. For instance, you could get a 150 dollars lower monthly payment, but be charged 10% of the loan amount (10 points). Foreclosure rescue schemes is a vicious fraud where predators are tricking desperate homeowners fearing the foreclosure. They usually ask them to sign over the home to them and offer to rent it to the owner while they bring their loan down, but they just collect rent from the owners and let the home go into foreclosure. Reverse mortgage fraud involves stealing from retirees by offering reverse mortgages with bad terms to steal the equity. There are different HECM programs that are the most popular reverse mortgage programs by far, and they can help you stay far away from suspicious reverse mortgages. As we said, most of people in the industry are honest professionals, and the industry itself is controlled. But do not assume anyone is above suspicion and watch out for red flags. The most Usual Red Flags for Mortgage FraudsYou should be wary if you are being pressurized, if you are being offered a deal that is simply too good to be true or if you are urged to do something you know is wrong. If someone is putting a pressure on you to make a decision as soon as possible, sign something right away or similar, it could be a clear red flag for a fraud. Of course, in many cases, this can just be a sales tactic, but you should always remember that you can take all the time you need. After all, buying a home and taking on a mortgage is one of the most important decisions you make. If you are being offered a deal that sounds too good to be true – it is usually the case. Do not be greedy and watch out for the small letters and read everything twice. Finally, it's a big red flag if you are urged to do something you know is wrong, or something you are not sure about. Arguments like "everyone does this" are false arguments. Consult a lawyer if in doubt, or ask for a second opinion. How to Avoid Mortgage FraudsMortgage frauds are unlikely, but not impossible. This means that you should stay alert and take steps to make sure you don’t become a victim of a fraud. - Distrust people who approach you – you should be the one getting in touch - Ask for a Loan Estimate Disclosure. Lenders must provide you with one within three business days of the application by law. - Ask a lot of questions - Get all the answers in writing - Get multiple quotes for your mortgage - Ask for a second opinion - Do not believe promises that are too good to be true - Be sceptical of false arguments like "everyone does this" - Always take your time to make an informed decision In conclusion, although mortgage frauds are really rare, one can never be cautious enough. Any professional wouldn’t mind answering even the “dumb” inquiries, and it’s always better to check something you’re not 100% sure about, then to miss out on an important detail.
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