With interest rates at historic lows due to the economic impacts of the COVID-19 pandemic, many people are taking advantage of the opportunity to either refinance their existing home or buy something new. Financing or refinancing a home when interest rates are low can save you hundreds of dollars on your monthly mortgage payments, so now is a good time to consider these options if you have the opportunity to do so.
Most of the time, getting a mortgage is a low-risk endeavor. As long as you can comfortably make your monthly payments and you plan to stay in your home for several years, buying a home or refinancing to a lower rate is generally going to be considered a sound investment. But, one risk of which many people are unaware of is the risk of mortgage loan fraud.
What Is Mortgage Loan Fraud?
Mortgage loan fraud can take many different forms, and both prospective homebuyers and existing homeowners need to be aware of the risk of fraud schemes related to their home loans. As explained by the Federal Bureau of Investigation (FBI):
“Mortgage fraud is a material misstatement, misrepresentation or omission relied on by an underwriter or lender to fund, purchase, or insure a loan. Prevalent mortgage fraud schemes include loan origination, foreclosure rescue, . . . short sale, illegal property flipping, [and] title/escrow/settlement fraud . . . schemes. Home equity line of credit, reverse mortgage fraud, and loan modification are also of rising concern.”
“Mortgage fraud perpetrators include licensed/registered and non-licensed/registered mortgage brokers, lenders appraisers, underwriters, accountants, real estate agents, settlement attorneys, land developers, investors, builders, bank account representatives, and trust account representatives. . . .”
Charging additional fees, charging additional interest or points, providing false information in order to obtain a customer, and offering unlicensed mortgage services are all examples of mortgage fraud that are perpetrated by lenders, scam artists, and others. Offering fraudulent mortgage relief “programs” and locking homeowners into high-cost loans that they cannot afford in order to foreclose on their homes are forms of mortgage fraud as well. As a borrower or prospective borrower, you need to be careful. Here are some tips you can follow:
7 Tips for Avoiding Mortgage Loan Fraud Scams
Tip #1: Choose Your Own Mortgage Lender
While some legitimate mortgage lenders market directly to consumers, many of the solicitations homeowners receive in the mail are scams. As a result, if you are thinking about buying or refinancing your home, you should do your own research and choose your own lender. Asking for referrals can be helpful, and you can also read reviews of mortgage lenders online. But, generally speaking, you do not want to respond to emails or mailings from lenders with whom you are unfamiliar.
Tip #2: Do Not Pay Any Advance Fees
When you finance or refinance a home purchase, all of the loan fees are taken care of at closing. You should not be required to pay anything upfront (this does not include earnest money deposits (EMDs), inspection fees, and appraisal fees, which you may need to pay during the home buying process). Advance fee schemes are common; and, typically, once you pay, you will never hear from the “lender” again.
Tip #3: Do Not Sign Anything Pertaining to Ownership of Your Home
Likewise, prior to closing, you should not be asked to sign anything pertaining to ownership of your home. This applies to your current home if you are an existing homeowner, and it applies to the home for which you are applying for a loan. Some mortgage loan fraud scams are designed to get homeowners to unknowingly transfer title to their homes. While this is plainly illegal, restoring your title can still prove to be very difficult and expensive.
Tip #4: Read Before You Sign
Financing or refinancing a home involves an extraordinary amount of paperwork. When it comes time to sign, homebuyers are often ushered through document packages with very little time to read what they are signing. Likewise, e-signature applications often skip from one signature block to the next, effectively discouraging borrowers from reviewing the terms of their loans.
While you do not necessarily need to parse out the legalese in your mortgage loan documents, at a minimum, you do want to make sure that the documents appear to be accurate and complete. Wrong addresses, blank fields, and other similar types of issues are often used to facilitate loan fraud scams.
Tip #5: Keep Copies of Everything
As you move through the home buying or refinancing process, try to make sure you keep copies of everything. Hopefully, you are dealing with a legitimate and upstanding lender (and you most likely are). But if you are not, your records could be crucial to recovering your fraudulent losses. Also, just in general, it is good practice to keep copies of your financial records so that you have them if you need them.
Tip #6: Review Your Mortgage Loan Statements
Once you close on your home loan, take the time to review your first few mortgage statements in detail. Does everything look accurate? Do you have any questions or concerns? While many banks sell their customers’ home loans fairly quickly, at least your first couple of statements should generally reflect the name of the bank from which you acquired your mortgage (and your bank should notify you if it sells your loan).
Tip #7: Rely on Professional Advice
Finally, when in doubt, rely on professional advice. Your real estate agent can help you with many aspects of the home buying process, and a residential real estate attorney can help you review the terms of your loan and identify any red flags for mortgage loan fraud.
Contact the Local Attorneys at Blado Kiger Bolan, P.S.
If you are concerned that you may be a victim of mortgage loan fraud, or if you want to make sure you are protected before you finance or refinance your home purchase, we encourage you to contact us for more information. To request a confidential consultation with one of our attorneys, please call us directly or tell us how we can help online today.