Mortgage Scams are not new in 2020. We pointed out last week, that in the next three years we expect a flood of innocent first-time homebuyers. However, with more innocent homeowners at risk, we thought it would be appropriate to put some red flags up. Mortgage scams are on the rise this year. Even mature buyers can fall into the traps of these clever criminal set-ups. So let’s look at the Red flags of three of the most common ones.
Mortgage Scams in our Well-Connected World
Palm State Mortgage Company has seen creative criminals zone in on their prospective victims through multiple pathways. They can target you through Internet as well as direct mail in rising numbers.
Today’s criminals are bold and creative. “In 2017 alone, 9,645 victims reported real estate fraud, resulting in losses of more than $56.2 million, according to data from the Federal Bureau of Investigation’s Internet Crime Complaint Center.”
And this does not count all the folks who are too ashamed of getting caught by scammers to report a complaint. Also concerned about scams is Melinda Opperman. She is the executive vice president of Community Outreach and Industry Relations with Credit.org. And her organization is a nonprofit credit counseling agency and member of the National Foundation for Credit Counseling, or NFCC.
“It’s a huge problem,” Opperman says. “A lot of the time, people don’t realize that using public WiFi connections where they conduct personal business through email or websites opens them up to (these scams) because the communications are not secure.”
Red-Flagged Mortgage Scams: Coming After Homebuyers
Thus, at Palm State Mortgage we want you to be aware of some of the common real estate and mortgage scams.
Red Flag Number One—The Edgy Escrow wire fraud
This scam begins with an email or phone call from someone at the “so-called” title or Escrow Company. Then, they give you specific instructions on where to wire your escrow funds.
The edgy set-up for this mortgage scam involves creating a fake website that deceptively, by design, looks just like the title or lending company you have been using. If you don’t look close, it appears genuine, right down to the phone numbers. You might be unaware scammers can use phone numbers that are only one number or letter off from your authentic company. If you do not notice this, you follow the wire instructions. Suddenly you have become an escrow fraud victim. What Happens Next? An Ugly Mortgage Scam Crime: The happy escrow fraud scammers withdraw the funds from offshore and they now have your money.
How to Protect Yourself from Escrow Wire Fraud
This is not as difficult as you might think. Go back to your lenders’ original documents.
- Please call only those phone numbers you see on those original documents.
- Then, check and verify your wiring instructions with them.
- In fact, here is a rule of thumb from Opperman, “Never click on email or text links, or send money online, without verifying wire instructions with a live person on the phone from a number that you’ve called and verified.”
- Odeta Kushi, senior economist with First American Financial Corporation agrees. She stated, “Be wary of any email or text requesting a change to wiring instructions you already have…”
Likewise, Palm State Mortgage Company warns you to always confirm the escrow account number before wiring money. For verification, call your settlement agent. She or he can validate the fund transfer as soon as you complete the legitimate directions.
Red Flag Number Two: Predatory Loan Flipping
An insidious fraud with a cute name, loan flipping occurs when an unethical lender convinces you to refinance your mortgage repeatedly. And naturally, they persuade you to borrow more money each and every time.
Additionally, the scammer adds high fees and points with every transaction. Eventually, homeowners reach a point-of-no-return, with higher loan payments than they can possibly pay. Plus, they have now borrowed and spent most or all of their home’s equity.
How to Protect Your Grandmother from Mortgage Flippers
Seniors who have Alzheimer’s or senility problems are often the targeted victims of this scam. Why? Because they have been paying for their home for years and have amassed a nest-egg of home equity.
A surprising number of seniors do not understand that this is a common scam. It’s sad to warn you that, yes, there are predatory lenders who compete to con homeowners with the alluring bait of a so-called better loan product. They also dangle the allure of a cash-out refinance to elderly homeowners. They are quick to point out that the senior can renovate their home, making it more accessible as they age in place.
Facing the Specter of Mortgage Flippers
If you are a senior citizen, Palm State Mortgage urges you to involve a trusted relative or professional friend before discussing key financial decisions. Someone on your side in these matters can help you see the difference between mortgage scams and good financial decisions.
Keeping an Eye on Your Equity:
Watch out for that nest egg of home equity. You never know when you might really need it. Likewise, we agree with Opperman, that if you’ve recently done a mortgage refinance, “it’s usually not in your best interest to do another transaction right away.”
Special Note: Another way to spot the red flag of the mortgage scam of mortgage flipping is to notice strange new companies that are sending free and unsolicited advice. You will see their red flags in the form of glossy direct mail, e-mail or calls when you did not ask for any such assistance. “Work only with known banks or lenders. And question all fees and penalties presented.”
Protection against the Mortgage Flippers
Use your paperwork to help you understand your current loan.
- Lenders provide loan estimates and closing disclosures by law.
- These two documents are listings of your fees and any third-party costs.
So, Palm State Mortgage says, Review these documents and compare them, before slipping into a possible refinancing trap.
Red Flag Number Three: Fiendish Foreclosure Relief
If you fall into financial difficulties, you might get behind in mortgage payments. That’s when the mortgage scam of Foreclosure Relief appears with all kinds of so-called Foreclosure Relief. Vulnerable homeowners, desperate to save their homes, are often blind to the extreme fees charged. Again, we refer to our expert, Opperman who states, “Scammers will claim that they can help homeowners save their homes and reduce their mortgage payments for a large, up-front fee…” Sadly, after paying the exorbitant upfront fees, the homeowners are stranded with even a heavier burden of debt.
A Bad Mortgage Scam Gone Worse
Beware of scams wrapped in red, white and blue. Some scams appear to be part of the US government or housing assistance programs. By impersonating government housing officials, some scams swindle homeowners out of hundreds or even thousands of dollars in fees.
So what can you do to protect yourself against imposters?
- Suspicious Minds: Be suspicious of any call from a government agency asking for money or information. Here’s your rule: “Government agencies don’t call you with threats, or promises of – or demands for – money. Scammers do.”
- Phone and Phony Identity: Don’t trust caller ID – Did you know scammers can fake it? It looks real, but beware.
- Proof in Black and White: Simply resolve never to pay with a gift card. If people tell you this is the only way to pay, they are likely it’s likely they are scammers
Check with the real agency. Look up their number. Call them to find out if they’re trying to reach you – and why
Special Alert: Mortgage Scams Caught Abusing Government Program, HARP
The realtors at Zillow recently warned homeowners about scammers who dress up their fraud by impersonating HARP deals. “When you get offers to refinance through HARP, do a quick search to learn more about the company behind the offer.”
Protect Yourself from HARP Impersonators
Palm State believes you can avoid HARP scammers by going to HARP.gov.
- There you will find a valid list of lenders approved by Then contact your current lender directly to get answers to any questions you may have and to see if you qualify.
- Watch out for websites not associated with your lender that may be misusing or misrepresenting HARP.
- Don’t Fall for Fake Artwork! Look for the HARP logo as a sign of assurance or visit the official HARP.gov website for complete information.
Protecting Yourself from Mortgage Scams
If you are in financial trouble, avoid foreclosure by working directly with your loan servicer. There might be proper ways to modify your existing loan, request forbearance, or make some other arrangement.
Likewise, did you know homeowners can first enlist the help of a HUD-accredited housing counselor to see what options they have? “A scammer will tell you not to talk to your lender and that’s a huge red flag,” Opperman says. And she adds, “It’s hard to speak to your lender when you’re in imminent default or become delinquent because you’re afraid it might speed up (losing your home). But you have to open the lines of communication with your lender.”
In our research, we dedicated this blog to three main mortgage scams. But as they say in commercials, “Wait there’s more.” We found over 20 different 2020 scams just waiting to trap homeowners. That is why, upon reflection, Palm State will soon be bringing you a Part Two for this blog on the powerful subject of mortgage scams in 2020. Until then, and always, be careful about the deals you take and the mortgage papers you sign. We’re here to help.