Monday, June 9, 2008

Most common mortgage scams

Sad to say there are still, and will always be, scam artists on the horizon who promise to save homeowners from foreclosure, but instead, walk away with their money. I typically prefer not to focus on such negative stuff, but forewarned is forearmed, so here is a brief description of five of the most common scams out there.

1) Bait and switch. The scammer discusses refinancing with the homeowner. Homeowner then proceeds to sign what he believes to be a loan application. In reality, they are title transfer papers. The homeowner has just, unknowingly, signed over his home to the scammer.

2) Upfront fees. The con artist tells the homeowner that he can get him into a program to clean up his credit and/or get him out of foreclosure -- for a fee. Once the homeowner pays the fee in advance of receiving service, the scammer disappears with the money.

3) Bankruptcy ploys. Similar to upfront fees, an attorney (or more likely, someone claiming to be an attorney) convinces the homeowner that filing for bankruptcy is his only way of avoiding foreclosure. The "attorney" collects a filing fee and disappears with the money.

4) Rent-to-buy. Scammers convince the homeowner to sell him the home with a provision that the original owner can remain as a renter. Once title has transferred, the former owner is kicked out.

5) Fraudulent loans. The con artist offers to secure a refinance deal for the homeowner, using the scammers supposedly higher credit score. Of course, the homeowner has to sign over title for the loan to go through. The scammer never reassigns title.

Source: Daily Real Estate News

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