Friday, May 24, 2013

Mortgage scams can occur when desperate borrowers are struggling to keep their homes or when uneducated first-time buyers agree to outrageous terms. The people who perpetuate mortgage scams promise to help, but prey on the weak, doing little to no work, charging excessive fees, and using tactics that often put homeowners at greater risk of losing their homes.

Predators can come in the form of lenders, appraisers, mortgage brokers or even home improvement contractors. These frauds have been known to do the following: sell properties for much more than they’re worth using false appraisals, encourage borrowers to lie on applications, charge high interest rates based on factors that are not credit history, charge fees for unnecessary or nonexistent services, knowingly lend more money than a borrower can afford to repay, and use high pressure tactics to sell home improvements and then finance them at high interest rates.

Every year, misinformed homebuyers become victims of lending or loan fraud. In order to avoid these types of fraud and become a smarter consumer, it’s important to understand the home-buying process. Keep these words of advice from HUD and Fannie Mae in mind and prevent yourself from becoming a victim.

• Interview several real estate professionals, and ask for and check references before you select one to help you buy or sell a home. The more background you know about an agent, the safer you will be.

• Know about the general pricing of houses in the neighborhood to prevent yourself from paying too much.

• Shop for a lender and compare costs. If someone is trying to steer you toward just one lender, be suspicious.

• Never, under any circumstances, let anyone convince you to make a false statement on your loan application, such as overstating your income, the source of your downpayment, failing to disclose your debt, or lying about the length of your employment. Lying on an application for whatever reason may result in criminal penalties.

• Don’t let anyone convince you to borrow more money than you know you need or can afford to repay. If you fall behind on payments, you could lose your house and all the money you already put in.

• Don’t sign a blank document or one containing blanks. If information is added after you sign, you could still be held responsible for the terms. Insert “N/A” or cross out any remaining blanks.

• Ask questions if there is anything you don’t understand. Never sign if you are unsure of something. Have your contract and loan agreement read over by an attorney skilled in real estate law. You can also take your documents to the HUD-approved housing counseling agency nearest you for further assistance, recommendations or free counseling.

A good rule of thumb: If a deal to buy, repair or refinance sounds too good to be true, it usually is!

Source: HUD, Fannie Mae

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