To increase the volume of loan production due to the ever-increasing performance pressure on mortgage lenders, concerns in the credit markets and controversy over subprime lending, a growing number of mortgage brokers and predatory lenders are resorting to deceptive practices. These practices range from convincing borrowers to act against common sense to illegal or fraudulent mortgage scams. Although several scams are drafted to prey on first-time borrowers and sellers, these scams are usually focused on people who are attempting to refinance existing mortgages.
Here are a few scams that people generally fall a prey to:
Scams Focused on Owners and Sellers:
Many scams are focused on homeowners convincing them to conduct unneeded or fake repair in their homes to committing fraud. These frauds may come up with various home improvement scams that may include roof scams, chimney cleaning and repair scam or providing door-to-door services, etc. Sellers usually fall for such scams because they want to keep their house up-to-date without any defects so that they get a good price for their house.
Scams Focused On Borrowers:
Large portion of fraudulent activity is focused on people who have already built equity in their homes and have capital to access. This is true for people who find themselves in financial difficulties and are desperate to find a method to relieve their short-term debts, such as credit cards. Such tricks are usually focused on first-time borrowers presenting certain types of loans without disclosing all the essential facts. In other cases, these tactics involve promises that are not actually followed.
Financial institutions committing acts that are deemed unfair to borrowers is not new to the mortgage market. Therefore, various laws have been formed to protect consumers by allowing them to make informed choices, promote competition among lenders and maximize the benefits of commerce. To gain a larger share of the mortgage pipeline, predatory lenders use deception in a housing boom and on the other hand, in a credit crisis, dishonest practices are used to dodge stricter underwriting guidelines.
Loan Modification Scams:
The most common foreclosure rescue fraud scheme is a loan modification scam. In such a scheme, the fraud offers to negotiate with the homeowner's lenders to lower their interest rate for a price, often guaranteeing the results, most of the times, in the form of 'money back guarantee'. More often, the homeowner falls prey to such scams, but receives no modification and no refund. This way, the money just cannot be recovered!Don't ever get involved with anyone who hints at performing illegal or improper acts even if there is a proposed benefit. Such benefit, even if it does materialize, will undoubtedly come with consequences and limitless risks. A professional real estate agent in your city will tell you about the various scams that take place in the real estate market. Because the more you know, the more aware you will remain and would perhaps never want to take a short-cut which doesn't end well.