The mortgage scam is one of the most dangerous traps someone can fall into. This is why, such a crime is punished, by law, for up to thirty years, in prison. The mortgage scam becomes more dangerous, the more real estate professionals are involved, into it. The scammer can easily profit from buyers who are unaware of what the contract they sign up with the lenders implies. This fraud can be easily perpetrated, as the mortgage business is either exempt of fraud reporting, or simply unreported. This is why, when such fraud occurs, it is hard to establish its extent and based on this, the mortgage scams are increasing.
There are various forms of mortgage fraud and they are perpetrated both by lender (for profit) or by borrower (for housing). They involve a lot of schemes, from identity theft to foreclosure and it is targeted, in lenders' case, against people with low income, particularly seniors and people with bad or no credit. These borrowers are, usually, forced into paying outrageous fees and interest rates. Borrowers, on the other side, may scam lenders by foreclosure, forced refinancing or by simply not paying their loans.
Between lenders and borrowers, the latter are more likely to become victims, as being unaware of all the tricks. Many, simply, become slaves to the lenders, wasting all their financial resources on house payments and, in the end, even loosing their homes. It is even worse for those who also borrow money for the down payment, falling, this way, into a so called secondary mortgage. Another dangerous case arises when the borrower is close or into foreclosure and makes another loan, hoping that that loan is going to prevent the loss of the home.
Best thing is not to buy a home, if you cannot afford. Stay debt free! Though, if you still want a loan, do not trust the lender! Check out authorized sources and make sure you are dealing with a certified one, with good reputation. Make sure that the information in the loan papers is complete and accurate, by comparing borrower's with lender's documents. Inform yourself about the value of the property. Do not loan more than you can afford and do not make inaccurate statements about how much you earn, your employment status or where the money from down payment come from. Make sure that the property was not “flipped”, too often. This means that its value was inflated or there is something wrong with it. Do not sign until the contract becomes entirely clear and you are sure it protects you, in any way. Check everything out, upon closing, to make sure that the lender did not include something you have not agreed on, meanwhile. Do not fall under pressure and do not go for “no money down” loans. This is, always, a way to make you buy properties you are not qualified for or you cannot afford. Consult and bring a specialized lawyer with you, upon closing.
