With all the attention on foreclosures and ways people are losing their homes, there comes a new crop of scams to either steal a home, strip the equity out or simply rough someone up at the closing table. Desperate people do desperate things. Sometimes when there is nowhere to turn, people turn to the devil for help. There are ways to avoid being in this situation to begin with, but here are 5 ways a mortgage consumer can easily be ripped off.

1.    Loan Modification Specialist: If you are trying to work with your current lender on modifying your existing loan and find that it is hell- it is. However, it is not a reason to give up or turn to a specialist for help. A Mortgage Modification Specialist is typically a group of ex-mortgage brokers, lawyers and title companies that have teamed up to help people work through the government programs. THEY ARE NOT ALLOWED TO TAKE A FEE UPFRONT FOR THIS SERVICE. If, the attorney, is the front man and requires a retainer, it is being split among the group. Let’s face it, this is not an easy task for anyone, and they are entitled to a fee, but not upfront. Continue to take the time to work with the lender yourself. If you need help, call the lawyer that represented you in the first place and ask them to refer an attorney. You need a lawyer not a specialist.

2.    Equity Skimming: Is a form of predatory lending where the borrower is enticed into a mortgage product that the lender knows they cannot afford to make payments on. Eventually, the borrower goes into foreclosure which is the idea. It is important to know what mortgage product you are signing up for. If you can afford the payments only because the initial interest is low or interest only payments and know you can’t afford the actual payment, don’t do it.

3.    Equity Flipping: Flipping is similar to skimming, but includes refinancing multiple times, adding in enormous closing fees and pulling the equity out of home. Again, with the idea the borrower will foreclose and the lender can get the house. This is difficult these days, because loan to values and cash out refi are capped by most lenders – thank goodness.

4.    Lowest Rate in Town: There are still mortgage companies that buy lists and call people- typically from the basement of some scummy mortgage banker/broker. Be wary of a phone call from stranger that has too much of your personal information and offers you a deal that is too good to be true. First why would you do business with someone that you do not know and second do you really think they can offer you something better than everybody else out there?  If you think you should refinance your current mortgage, call the lender who currently hold your mortgage. You may be able to get the best deal there because their closing cost should be lower and they might offer you a very competitive rate because they do not want to lose the loan. To compare, call directly several large commercial banks’ or go to their websites and see what their rates are.

5.    Phantom Assignment of Mortgages: This is where an unsuspecting borrower goes to a closing and signs several copies of the Mortgage and Promissory Note, one going to the original lender, the others being retained by the loan officer. The “real loan” is recorded and the borrower begins making payments to them. After a few months, the borrower receives an assignment of mortgage letter from a phantom company which claims they purchased the loan and the payments should be made there. The borrower begins sending checks to the new lender because the letter instructed them to. The payments are actually being sent to a phantom account and the real lender is not getting any money. Eventually they will send out a default letter and by then the loan will be terribly behind and the taxes unpaid. When a letter is received, the borrower should call the current lender to verify that it was sold or transferred to the new lender and verify the name, address and new loan number. In fact, the original lender should also send out the notice to the borrower explaining the transfer.

Most of the above are stupid and sloppy ways to scam the desperate, naive or unsuspecting. In order to protect yourself from being one of those victims, a few simple step can be made.

·         Only do business with a company you know, were referred to or thoroughly researched

·         Do some pre-research on mortgage products, interest rates, closing costs and new disclosures yourself

·         Review all paperwork prior to the closing

·         Do not sign anything in blank

·         Bring all the papers to closing and compare rates and fees to make sure they are the same

·         Ask questions

·         Ask for help

·         Hire a lawyer-even to just review the paperwork

And remember……if it is too good to be true, it is! So don’t go bragging to your friends because the last chuckle will not be your own