Friday, December 8, 2017

Loan Scams and What To Watch Out For

Many loan officers are going through continuing education this time of year to renew their license for 2018. The educator's in our industry are expressing the need for all of us in finance to be more vigilant when it comes to recognizing fraud when we come across it. 
It’s interesting to me some of the things STILL happening in our industry that are fraudulent and harmful to consumers, the mortgage and real estate industies and ultimately the economic health of our country.
I guess I am naive to think because of all the new regulations there would be less fraud happening. Unfortunately, all of us need to be more aware because there are many criminals committing fraud and stealing our identities, our homes and our equity. 
We all need to educate ourselves and do our homework. Researching companies and individuals before we provide any personal information to anyone, we need to have our guard up always. I’ve listed some information in this post that will hopefully help you to better recognize and avoid being a victim of mortgage loan scams, fraud and ID theft.

Foreclosure Rescue and Mortgage Reduction or Refinancing Scams
The scammer will contact a distress homeowner by phone or by a knock on their door. They will make all kinds of promises to get you to allow them to work with your lender on your behalf to adjust your loan by reducing payments, even promising principal reduction. Some will even claim to be a government agency. They will charge the homeowner a large upfront fee for their services and then do nothing for the distress homeowners, leaving them in worse financial condition then when they found them.
There are many companies mostly non-profits that do help distress homeowners. But you won’t get a call from them without you first calling them. Look up any company claiming to perform mortgage relief services with the BBB and your states Attorney General to see if they have complaints or they are a real company. Look up their licenses to get information about them and their services. Be careful and just because they state they work for an attorney doesn't mean what they are are doing is legal. 

Predatory Lending comes in many different forms. A lender using hard selling tactics and not providing all the information about the loan. Including not telling you the rate and term, telling you one thing and then changing the loan type, rate or term, that's called a bait and switch sells tactic. Maybe they do give you a few days to think it over, but you have already spent money on appraisal etc. so you move forward because you don’t want to hold up closing. Then months later after you close you find out your rate is about to change or you have a balloon payment you didn't know about. Within your loan documents the most important document is your Note, Deed of Trust or Mortgage Deed, READ them make sure the match your original loan estimate or loan disclosure. The information on your Note will be what you have to pay for the term of your loan. Any changes to rate or term will be listed in your Note with the date of change.
Most lenders who do this come from unsolicited phone call or telemarketer. Before you start a loan with a lender do your homework, find out about the company you are considering, check out their licensing. National Mortgage Licensing System NMLS keeps track of lenders and the people or loan officers that work for them.  
NMLS Consumer Access  Then check with the Better Business Bureau (BBB) Check your states Attorney General Office and see if that company is in good standings. 

Equity Stripping is another horrible way a lender can assist you into defaulting your home loan.  You decide to refinance because rates have dropped but you may not qualify for a normal refinance. A lender gives you a loan based on the equity in your home NOT your ability to repay. These lenders are hoping you default because they are lending based on your equity. They want your home!

Loan Flipping is another way a lender is after your equity. You refinance your loan adding all the loan fees to your principal. This is normal practice when you refinance so you don’t always see this coming. Then 12 months goes by and that same lender contacts you and says rates have gone down even more and offers to refinance and reduce your payment even more. Again, adding loan fees onto your principal.
This is done repeatedly, and they may even offer to let you take cash out for a vacation or to consolidate your other debts increasing the loan amount each time and adding onto your principal with each refinance, before you know it you are upside down in your mortgage and in jeopardy of foreclosure.
There are many good reasons to refinance your home just be aware of your situation and know the amount of your equity. Don’t be blindsided and end up with a home that you owe more then it’s worth.

Upfront Fee Scams, lenders that require upfront fees for processing or an application fee. These can be substantial fees of $500 to $1000 or more and non-refundable. Lenders will target people with bad credit and tell them that their credit will not prevent them from getting a loan. They collect these fees and nothing else happens, the borrower never gets a loan and because it’s non-refundable you lose your money.
The only fees a lender can charge is for your credit report. This fee is normally paid to a 3rd party credit bureau and the lender is not allowed to charge a penny over the fee.
The other fee is for your appraisal this is also paid to a 3rd party appraisal vendor or AMC. Again, the lender is NOT allowed to charge a penny more then the report cost.
If they insist you pay any other fees RUN and don’t give them any of your personal information.

ID theft can happen to any of us doing things like applying for a home loan, buying a car, shopping online and many other situations we come across all the time. Ways you can avoid ID theft is to safeguard your personal information as best you can. Don’t email personal information because email is not secure. Don’t give out your Social Security number to anyone that calls you for any reason. Monitor you bank accounts and your credit accounts and set up alerts for both.

I have listed some resources below. I hope this information helps you and if you ever have any questions please contact me. 


Thank you for visiting my blog, I encourage you to leave a comment or questions. Let me know if my blog has helped you. I would love to hear your thoughts and any ideas for future posts. 

Roxy Redenbaugh
ACMC Loan Consultant
Certified Mortgage Coach
Branch Manager
NMLS #269926
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