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Watch Out For Mortgage and Housing Scams

By Erik Folgate

We are continuing to see the fall-out of the housing slump which means more foreclosures, falling home values, and more financially distressed homeowners. Scam artists love to prey on people that are in a tough financial situation. It is only fitting that scammers are trying to capitalize off of the housing crisis. Here are some housing scams that you need to watch out for:

Rescue Scams: Con artists will set up fake companies acting like they want to help you keep your house or pay your mortgage payment. What they do is get you to sign a document called a “quit claim deed” that essentially signs the deed to the property over to them. Then, they go and sell your house out from under your feet, and you are forced to leave the house.

Equity Stripping Scams: Renters beware. Fraudulent investors don’t make the mortgage payments, but rents out the vacant property until the lender forecloses on the property.

Straw Buyers: The identity of the borrower is concealed through the use of a nominee who allows the borrower to use the nominee’s name and credit history to apply for a loan.

Fraudulent Appraisal: Usually a whole ring of scammers from the mortgage broker, investor, and title company are paid off to help inflate the value of an appraisal on a house. The home might really be worth $150,000, but the house is sold for $200,000 to an unsuspecting buyer.

Air Loans: These are loans secure for property that doesn’t even exist. Every document is made up out of “thin air”.

Silent second: Either the mortgage broker or seller gives the buyer the money for a down payment to help them qualify for the loan. If the primary lender doesn’t know about it, then it’s definitely not a legal move. Make sure if the seller offers this as an incentive to buy the house, that they have received pre-approval from a lender.

Tips for Avoiding Housing and Lending Scams:

  1. Never sign a document that you don’t understand.
  2. Do your homework. Research the area you want to buy a house and recent sales made in that neighborhood.
  3. Never leave any part of your application blank.
  4. Never give out personal information over the phone when someone first contacts you.
  5. Use this rule of thumb. If it sounds too good to be true, it probably IS too good to be true.

Erik Folgate
Erik and his wife, Lindzee, live in Orlando, Florida with a baby boy on the way. Erik works as an account manager for a marketing company, and considers counseling friends, family and the readers of Money Crashers his personal ministry to others. Erik became passionate about personal finance and helping others make wise financial decisions after racking up over $20k in credit card and student loan debt within the first two years of college.

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Comments

  • Laura

    Hi,

    I have visited your blog ( http://www.moneycrashers.com ) and found out that it is rather informative. I’m searching for advertising. I want to buy links at your pages. Is it possible? How much does it cost? Please, let me know about your decision. Waiting for your soon reply. Thanks.

  • http://www.ThriftyMamas.com Connie Brooks

    You know, you are really foresighted to mention this. I suppose it’s inevitable, but I have not seen anyone else covering it yet.

    Very, very sad that people would take advantage of others in a situation like this, but it’s all too common.

  • http://madsaver.com Mac

    Honestly, I haven’t heard of most of these scams. I wonder how prevalent they are in today’s market? I’ve heard enough about straw buyers, but only in regards to buying guns for bad dudes.
    As far as avoiding mortgage scams, I will probably stick with established mortgage companies that I’ve heard of when negotiating my next housing loan.

  • jbird

    has anyone ever heard of homefit in the baltimore county area???they supposably find u a cheap house n work with ur security deposit no credit check its sounds funny to me bc they were asking for my bank card number over the phone n said i needed to pay a fee of $89 before they could see what was in there computer tht they had to register me it all seems fake to me n i don t wanna give someone my account number to rob me n be able to access all my personal information

  • Jventis

    Always leave the escrow money signature blank when buying, and never pay the escrow fee. Start looking for a house 4 years before you want to buy and never, ever pay one escrow fee.

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