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Mortgage Fraud: How to Avoid Being Scammed

[Mar 27, 2009.]


The largest mortgage-fraud conspiracy in Washington state history was busted up by federal authorities. Federal agents indicted seven people who allegedly cheated banks and other financial institutions out of $48 million.

The scheme involved repeatedly purchasing and selling homes in the Seattle area. In some cases borrowers qualified for mortgages after loan documents were falsified to inflate their income.

This case is a reminder that scammers are working overtime to cheat desperate homeowners looking for relief in this economy. Here are some ways to guard against becoming a victim of mortgage fraud.

—People should ask “how much mortgage can I afford” before accepting a mortgage loan deal. Scammers often talk people into inflating their income on loan documents, or do it without a borrower’s knowledge. Borrowers should steer clear of any mortgage lenders who ask them to lie about their income.

Only deal with reputable mortgage lenders. If a borrower has any doubt about a lender they should contact their state attorney general’s office.

—Homeowners who need help paying their home loan should contact a mortgage housing counselor approved by the U.S. Department of Housing and Urban Development (HUD). Counselors approved by HUD may be able to help homeowners avoid foreclosure.

—Borrowers should never sign blank or incomplete mortgage loan documents.

—Mortgage lenders should always give borrowers a Truth in Lending Disclosure Statement within three business days of applying for a loan. This statement should show all the estimated costs and payment amounts for the mortgage. 

—Borrowers should check the sales history of the property they plan to buy to see if there have been too many sales in a short period time. Too many sales could indicate a scheme to inflate the home’s value.

—Borrowers should check with the local tax authority to make sure the person trying to sell the property actually owns it.

—No money down deals are a thing of the past for most people. Many mortgage lenders are requiring 20% down payments.

Mortgage scams are a serious problem. In fact, the Federal Bureau of Investigation (FBI) has doubled the number of agents investigating mortgage fraud, and said the number of cases rose to 2,000 from 700 in the last two years.

No one should be so desperate to buy a home or refinance their mortgage that they rush through the application process. The most important thing to remember is if a mortgage deal seems to good to be true it probably is.


About Author:

Francine L. Huff is a freelance journalist and the author of The 25-Day Money Makeover for Women. She has appeared on a variety of TV and radio shows.

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