The best defense against mortgage loan fraud is being well informed.
Here are some tips and advice from the Real Estate Law Center to help identify potentially fraudulent loan practices and avoid becoming a victim of loan fraud.
Don’t Transfer Home Ownership
Dishonest lenders tell you that you are facing a foreclosure. They then convince the owner to sign over the house deed “temporarily”, for a fee. The owner loses not only the up-front fees but more importantly, the perpetrator often turns around and sells the house out from under them to someone else. The home owner is out of their house!
Avoid No Money Down
Beware of “no money down” loan offers. These are used to encourage people to buy homes they probably can not afford.
Don’t Be Forced Into Lying on Applications
Don’t let anyone suggest or force you into making false statements on your loan application, such as exaggerating the home’s value or lying about where your down payment is coming from. This is illegal. It also is a sign of a scammer looking to increase their profit on the deal by artificially inflating the home’s value.
Stay Away from Blank Contracts
Never sign a blank document or a document with blank lines that can be filled in later. Do not let anyone say, “We’ll fill that in later.” Remember: you are legally bound by your signature and are responsible.
Check referrals for any real estate and mortgage professionals when buying, selling or refinancing a home. Be sure to check their licenses with appropriate regulatory government authorities in your state, county, city or town. For real estate agents, contact the local realtors board. Most mortgage professionals are honest and above board, but unfortunately, a small percentage are unscrupulous: referrals can help weed out the bad ones.
Shop for a lender and compare costs. Be suspicious if anyone tries to steer you to just one lender. Be suspicious when the cost of a home improvement goes up if you don’t accept the contractor’s financing.
Review recent sales and other statistics for what other houses in the neighborhood sold for to get an idea of the current home value. Also review recent tax assessments of nearby homes. Don’t let anyone, including a broker, or mortgage lender, force you into selling your house for less than its worth. Knowing the home’s value gives you the advantage.
Review Documents Carefully
Be sure to carefully review ALL loan documents signed at closing. If there is something you don’t understand, take the time to ask questions. If you still don’t understand or agree to part of the agreement, just don’t sign the document. Or, ask an attorney who can answer any questions and who can review the document before its signed.
Know All Costs
Review and understand all the costs associated with the loan and know what is covered. Mortgage loans can include the actual amount borrowed, private mortgage insurance and closing costs. Be sure the loan is not “packaged” with other fees or services such as premium credit insurance, or other products you dont understand, don’t want or don’t agree to.