Mortgage fraud is on the rise today in the housing market, significantly so since 2001. In a real estate market where mortgage fraud was few and far between it has grown to high levels for both buyers and sellers and has created havoc and financial damage in the lives of many homeowners and home buyers. First-time home buyers and seniors are two of the highly targeted markets for home mortgage scams.
Mortgage fraud actually refers to a variety of scams. Most of these scams involve inflating the value of a house or other real property for more than its value and the scammer pockets the difference. It significantly affects your home buying, home-selling and home equity. It can raise its ugly head for subprime loans, foreclosures and reverse mortgages. It also can affect insider trading as it relates to mortgage securities.
The following tips will show you how you can avoid these scams and stop or spot mortgage fraud. It'll help you become informed and prepared if you're a homeowner looking to refinance or sell your home or if you're a home buyer.
Be wary of any investment opportunities that offer "no money down" or "cash back at closing." Be wary of adjustable mortgage interest rates and thoroughly understand what this means before you go this route.
Adjustable interest rates have created many home bad credit problems. Many home buyers just did not understand or were not fully informed about the future jump in interest rates and what that would mean. Many home buyers were not prepared for these high interest rates.
Make sure to check the history of the sales on the property. How many previous owners were there for the property? If there have been several sales within a short time it indicates the values are inflated.
Make sure to have your own real estate agent, real estate professional or real estate appraiser establish the value. Your best bet is to hire you own appraiser or a bank official who can validate the property price in case it's inflated. This can be hard to tell in rapidly rising or falling markets. Scammers who are intent on fraud will pay an appraiser for the appraisal and report they want.
Make sure they are using comparables - that is getting the prices on similar properties that have sold in your area - not the prices on listed homes that haven't sold. Check with your local tax assessor or whoever records the deeds to the property to make sure that the seller really does have title or own the property.
Common sense would tell you never to let anyone else use your name or Social Security number to buy a home or other property, even if they offer to pay you. But believe it or not this does happen.
Make sure to read and understand everything on your contract and other documents that you're asked to sign. Talk to your real estate agent if you have one or a real estate attorney if you need anything explained.
If any of the documents have any blank areas or have any information that is not accurate, don't sign. Check to make sure that your income is not overstated, the, source of your down payment is correct, the sales price is right, the type and length of your employment and states your intention to live in or on the property as your primary residence not use it for a rental if that's the agreement.
Make sure to deal directly with the mortgage broker you've been working with or directly with the lender. Don't let anyone lese handle or arrange your loan for you. Make sure you get a copy of all the signed closing documents.
Make sure to watch out for any of the older folks or first-time home buyers you know who may be unfamiliar with real estate transactions and real estate financing.
Mortgage fraud is most rampant in Nevada, California, Florida, Arizona and Illinois so if you live in these states watch out.
Much of the real estate fraud or mortgage fraud or scams are due to real estate insiders - mortgage brokers, lenders, loan officials and real estate brokers.
For example: your real estate broker insists that you use a certain lender or they have a mortgage company on site or in the same complex. Sure, many can be on the up and up but some are not. Your real estate broker should help you find the best and not steer you to one that he is in cahoots with. You have the final say.
Don't let any lender try to talk you into borrowing more money than you need or can afford. Make sure to take your time and don't feel pressured or rushed. Beware of any nothing-down loans and altered information to qualify you for a home loan. Don't borrow any money that you can't afford to pay back.
Ask your family, friends, co-workers and associates, who you trust who have recently completed a home mortgage, for referrals to mortgage brokers, lenders or other real estate professionals. This would be true also for loan modifications and "restructuring" loans.
Lastly make sure you get the best credit and financial counseling, go to home buying classes, real estate financing seminars or workshops and brush up on your mortgage and home buying education before taking the plunge. Avoid mortgage fraud by knowing the pitfalls and proceed slowly and cautiously and get an honest real estate broker or professional for the best home mortgage experience.
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