Some Common Mortgage Scams

You may think that you are exceedingly experienced in regards to the housing economy and home financing process, but there are many different threats to your home and financial security that exist. Due to the housing market crash in 2007, scam artists and predatory lenders have become much more conniving in terms of targeting borrowers. The number of foreclosures and mortgage delinquincies have givent plenty of working opportunity to the mortgage scammers and delinquincies.

It benefits you to know about common mortgage scams whether you are a current homeowner or struggling monetarily.

1. Bait-and-Switch

This scam is one of the oldest scams known. It has recently been adapted for use by dishonest lenders. The foundation of this scam is that the to-be borrower is tempted with an enticing loan offer, such as low montly payments or a challenging interest rate. You may put a lot of time and effort into prparing for financing, but then the lender presents much less enticing home loans. Victims of bait-and-switch often agree to go through with getting a much more pricey mortgage because they either feel too invested or they are wary of not being able to find financing for their home anywhere else.

2. "Leaseback Scheme"

This scam is also known as equity stripping. The tricksters present themselves as "mortgage rescuers," or scam artists who prey on high-equity property that belongs to those who are struggling monetarily. The first step of this scam is the homeowner being rescued from their unaffordable mortgage. You would sign the mortgage to a rescuer in exchange for the ability to continue living in your home as a renter. The payments go toward buying the property back with interest, while the homeowner thinks they are paying off the mortgage. The homeowners end up not being able to pay their rent, are evicted from their home and the "rescuer" is simply pocketing the rent money.

3. Illegal Flipping

Not a lot of people favor house flipping, but it is entirely legal. The premise of house flipping is that you purchase a property at a low price and fix it up to sell it for thousands more. This practice only becomes a scam when a person lies about the value of a home in order to profit from it. The most well-known form of illegal flipping is when an investor purchases a fixer upper at a high discount and then collaborates with a real estate appraiser to inflate the value of the property. The home buyer is enticed into solidifying a loan for this inflated amount and then the home is sold again for a large profit.

One of the many ways to protect yourself against scamming is to know the red flags and be suspicious about any deal that seems too good to be true. One of the most known red flags of a mortgage scam is the request for an upfront fee. No legitimate mortgage program would require you to pay a fee prior to recieving any services. The best thing to do when experiencing financial hardships in relation to home mortgaging is to talk to your lender directly and request help. Selling your home for a fraction of its original value is still better than being subjected to a mortgage scam and losing your home to a scam artist.

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