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3 types of consumer mortgage fraud

On Behalf of | Nov 14, 2022 | Consumer Protection

For most Americans, buying a home means taking on a potentially large mortgage. However, even short-term financial problems can make it difficult for the average family to keep up with monthly payments.

Unfortunately, fraudulent lenders and others posing as lending or real estate companies may try to take advantage of struggling homeowners. That is especially true for families who may be facing overwhelming debt or even foreclosure.

1. Fraudulent Loan Modifications

A business may offer to negotiate lower payments in exchange for a one-time fee. Often companies ask owners to pay this fee upfront, presumably to ensure fast processing. However, once paid, homeowners may find that the company not only failed to negotiate better terms but actually negotiated an even higher payment plan.

2. Foreclosure rescue plans

Fraudulent companies may also ask for an upfront fee to help homeowners avoid foreclosure proceedings. In some cases, the company may even offer to file for bankruptcy on the homeowner’s behalf. However, too often, these seemingly official representatives are looking to profit off exorbitant fees while failing to offer needed financial assistance.

3. Equity Skimming

Deceptive agents sometimes offer to purchase a home that is in default to prevent immediate foreclosure. The company may offer to rent the home out, often at a very high rate. Meanwhile, the investor can use ownership of the home’s deed to refinance the property, strip it of equity and resell it at a profit that the original homeowner will never see.

Homeowners struggling with mortgage payments should always be wary of representatives approaching them with unsolicited offers that seem too good to be true. That is especially the case if “agents” request sensitive financial information over the phone and without proof of their government or legitimate company affiliation.