Mortgage Scams: How To Avoid Losing the House From Under Your Feet, Part II

Mortgage scams are on the rise and in my last blog I listed some of the more common ones. How can you protect yourself and your home from shady mortgage brokers, sellers, and realtors? I put together a list of tips from Bankrate.com, FBI.gov, and the advice of a few altruistic banking friends who wished to remain anonymous for contractual reasons.

• If it sounds too good to be true, it probably is. Many ads that promised "Credit No Problem" or "No Down Payment," turned out to be scams.
• Get referrals for real estate, mortgage lenders, and brokers before buying or selling your home, and check licenses with state boards. Avoid financing with a home seller unless you absolutely have to.
• Do your own research on what other homes in the neighborhood have sold for, and look into recent tax assessments of neighborhood homes.
• Don’t let anyone—realtor, mortgage broker, lender—talk you into making a false statement on your loan application.
• Be sure you read your contracts thoroughly and understand what you are signing before you do so. If possible, consider hiring a closing attorney to review your loan before signing. Ask the lender questions.
  1. Bring the original Truth in Lending statement you were sent by the lender at the beginning of your application process to the closing and compare that with the actual settlement statement. If there are material differences, question them.
  2. What is my interest rate? Is it fixed for the life of my loan? If not, when does it change? How much can it the rate increase when it does change and what will that do to my payment? How often does it adjust?
  3. What is the amortization on my loan?
• Never sign a blank document or a document that contains blank lines.
• Know your rights and responsibilities and the rights and responsibilities of your lender. There are laws in place to protect people, like the Right of Rescission, which gives you three days after signing a contract to retract some types of home loans without losing any money.
• Ask to review your documentation ahead of time. Don’t be afraid to seek expert advice and ask questions.
• U.S. Department of Housing and Urban Development provides counseling for low-income homeowners.

If you’re already a homeowner and you’re having trouble making mortgage payments, contact your lender before the situation gets too dire. There are plenty of scams out there that claim to eliminate mortgage debt or help you out if you’re facing foreclosure—don’t fall for them! The lenders don’t want your house, so most will work with you to help you keep it.

Comments

[Nick]

Good advice. Another one is to be wary of anyone who asks you to leave just one or two specific lines blank on a form. Usually that's the date line, which can then be used to forward-date or backdate documents.

Home buyers or those refinancing should also check the signatures on copies of documents they are given to make sure they signed that specific document in its original form. With scanners, copy machines, and photo editing software, it's never been easier to forge a signature and put it on an altered document.

[Famin]

That's excellent advice, Nick. Back-dated or forward-dated documents could land you in a pretty sticky situation. It's well worth the extra effort to check those documents carefully before signing them!

[John]

Nick, I agree with you but what about the seniors who are being scammed by their own families? An 84-year-old woman who owned her house in Oregon was scammed by her own son. Her house was paid for and one of her sons offered to update the house so she wouldn't outlive her money. Long story short, she went into assisted living and the son took a maximum loan out, gutted the house, and spent the money. He left her out in the cold and expected the state to take care of her.

[Famin Ahmed]

What a horrible situation, John. Could anything have been done to protect this 84-year-old woman? Do you have any recommendations?