Top 3 Emerging Mortgage Scams To Watch Out For

In its recent annual report to the Mortgage Banker’s Association, the Mortgage Asset Research Institute described three emerging mortgage fraud schemes that are either new or increasing in popularity.

Top 3 Mortgage Fraud Schemes To Watch Out For

Foreclosure Prevention Schemes – These generally involve fraudsters posing as professional, knowledgeable foreclosure specialists. Homeowners facing the threat of foreclosure and nearing eviction are contacted by these “foreclosure specialists” who promise to work out their loan problems or buy their home and offer the homeowners tenancy. Unfortunately for the homeowner, the fraudster has no intention of following through with these promises and instead will manipulate the homeowner into deeding the property to them. Once the fraudster obtains the signed documents, a false lien release is generally filed or leveraged to secure funds from a fabricated sale or refinance on the property. In many cases, the homeowner is under the belief that they will rent the property for a period of time until they are in a better position to regain ownership rights. The fraudster continues to accept payments made by the homeowner while selling the property, absconding with the funds, and eventually
evicting the homeowners. Perpetrators of this type of fraud often move from town to town, sizing up their opportunities, quickly scamming as many homeowners as possible, inflicting costly damages, and then moving on to the next location.

Elderly and Immigrant Identity Fraud — While not new, elderly and immigrant fraud is regaining popularity. In this predatory practice elderly and non English-speaking consumers are taken advantage of by fraudsters who steal their identities and use them in strawbuying or other property transactions. This is currently happening in some reverse mortgage situations. Similarly, some immigrants who rent properties are discovering that their identities have been used on fabricated loan transactions. A simple inquiry about a loan product that leverages investment or rental properties can be enough to obtain information for use on fabricated loan transactions.

Builder Bail-Out Fraud
– This involves securing funds for condominium conversion or planned community development properties that, unbeknownst to the investor, will not be completed. The scams entail multiple purchases from would-be investors or false identities on fabricated loan transactions. Investors are lured by photos or inspections of a few converted units used as models with promises of further rehabilitation of remaining units. Once the contracts are in place, the fraud continues as the perpetrator secures funding for the contracts; however, no additional work is done and the investors and lenders are left with incomplete and, in some cases, uninhabitable
dilapidated buildings.

Eleventh Periodic Mortgage Fraud Case Report To: Mortgage Bankers Association [MARI]
(Photo:morisius cosmonaut)

Comments

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  1. roadapples says:

    ..ahh america 2.0

  2. catskyfire says:

    Scams have been going on since Og realized he could swindle Ooga out of his rock.

  3. B says:

    Other scams to watch out for:
    The “Balloon” payment loan
    “Interest Only” loans.

    • Traveshamockery says:

      @B: Balloon payment loans aren’t a scam, and neither are interest only loans. They’re annoying, and tricky, and can be sold deceptively, but they’re by no means a scam in and of themselves.

      /have a balloon loan
      //at least until I complete my refinance in a week or two
      ///$350 closing costs FTW.

    • paulrules says:

      @Billy Gillispie Halftime Interview:

      “They’re annoying, tricky, and can be sold deceptively…”

      May I have your definition of a scam then?

  4. Trencher93 says:

    Once again, how do elderly people get to be old and have anything at all left to their names, if they’re so gullible they fall for scams?

    • Traveshamockery says:

      @Trencher93: I think it has to do with diminishing mental capacity as they get older, and also with over-medication of our elderly. Yeah, they’re wiser, but that doesn’t mean they’re all as quick-witted as we blog-reading whippersnappers.

  5. BuddyGuyMontag says:

    The only issue with #1 is… nobody’s buying houses. And wouldn’t most people look at a house first before buying it?

    Granted, the fraudster still has the deed, but he may screw himself up if he can’t sell the house.

    • ludwigk says:

      @BuddyGuyMontag: You’re forgetting that the Fraudster acquires the deed to the house for FREE. He doesn’t need a competitive market price for the house. He scams some payments for his “services” from the homeowner, then sell the house to someone else for whatever he can get for it. He can sell it for pennies on the dollar (of whatever equity is in the house to sell), and still make SOMETHING off of it.

  6. Blueskylaw says:

    @B

    Don’t forget the biggest scam of all, Adjustable Rate Mortgages.

  7. Stanwell says:

    I was expecting to see “pay thousands of dollars to a company to have them renegotiate your loan with the mortgage company, only to have the loan go into foreclosure anyway after they don’t do anything but make a couple of phone calls.” Working in collections i see this all the time. “How much money do you have on hand? Yeah, our fee will be about 80% of that. Sign this authorization and we’ll handle everything.” Three months later the mortgager calls in and the loan’s in foreclosure, the company hasn’t made but a token effort to work with the lender, and the mortgager is out a hefty chunk of change that could go to their past due loan. Yes, there are legitimate companies out there and they’re not all blatant scammers… but even the best of them doesn’t do anything you couldn’t do yourself.

  8. Dennis Judd says:

    balloon loans can be used as a tool for good. For example it helped us avoid PMI for not having 20% down and then 2 months later when we sold my mother’s house we paid it off in full.

    Sure they jacked the interest up on us at closing, but since we knew we’d be paying it off in full soon it wasn’t a big deal.

    Dangerous…but not a scam.

  9. Marshfield says:

    Big news story lately was the Trump Condos in Mexico that went nowhere after people spent hundreds of thousands of dollars.

    Builder Bail-out Fraud to the max

    [www.google.com]

  10. Anonymous says:

    “ARMs” are scams? “Interest Only” are scams?

    No, both serve fantastic purposes when used well.

    If you’re not planning on being in a house for five years, you’re being scammed if you’re NOT offered an ARM.

    The first two years you’re in a straight 30-year fixed, you don’t even pay down two percent of equity in your house – you’re paying NEARLY interest only anyway. So, if you’re not planning on being in the house a long time, and you can get better rates by going interest only… There’s no danger there. There’s also no danger in a rising market… But as we’ve seen if you’re OVERextended to begin with, this is a bad option in a sinking market. But owning the same house with a straight mortgage would also be bad in the same market, if you’re overextended…

  11. Anonymous says:

    “ARMs” are scams? “Interest Only” are scams?

    No, both serve fantastic purposes when used well.

    If you’re not planning on being in a house for five years, you’re being scammed if you’re NOT offered an ARM.

    The first two years you’re in a straight 30-year fixed, you don’t even pay down two percent of equity in your house – you’re paying NEARLY interest only anyway. So, if you’re not planning on being in the house a long time, and you can get better rates by going interest only… There’s no danger there. There’s also no danger in a rising market… But as we’ve seen if you’re OVERextended to begin with, this is a bad option in a sinking market. But owning the same house with a straight mortgage would also be bad in the same market, if you’re overextended…

  12. Tiber says:

    Wow, did everyone replying to other “scams” lose their sense of humor or something?