Whether you have just started the mortgage process or are making plans to buy a home, be cautious of some common mortgage scams. Avoid getting swindled, and minimize your risk during the mortgage process by educating yourself on the topics below!  

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What is Mortgage Wire Fraud? 

One of the most common scams in real estate is mortgage wire fraud, particularly concerning escrow. Specifically, wire fraud occurs when a scammer impersonates a real estate agent, escrow officer, or mortgage lender, and convinces the borrower to divert closing costs to a fraudulent account. Criminals tend to target victims during the mortgage closing process and hack into the other party’s email account via phishing or hacking. Here are some steps you can take to detect and avoid mortgage fraud:  

  • Collect third-party contact information early on.  
  • Create secret passcodes with key people in the home buying process. 
  • Confirm by phone before you send a wire transfer.  
  • Verify the transaction after it’s complete. 

What are Foreclosure Relief Scams?   

According to Consumer Finance, mortgage assistance and foreclosure relief scams target homeowners whose financial hardships put them at risk of losing their homes. Moreover, criminals often use mail or email to impersonate a government agency to convince homeowners they can help with their mortgage for an upfront fee. Look out for the following warning signs to help identify a foreclosure relief scheme:  

  • Tells you to stop making mortgage loan payments.  
  • Charges up-front fees.   
  • Asks you to make your payments to someone other than your lender or servicer.  
  • Tries to get you to sign over the title to your property. 
  • Pressures you to act immediately. 

What is Predatory Lending?  

Predatory lending is any lending practice that uses misleading or unethical tactics to persuade borrowers to take out loans that are not in their best interests according to Consumer Affairs. Often, victims of predatory lending are senior citizens and individuals with lower incomes. However, it’s not uncommon for borrowers to sign a loan agreement without fully understanding the terms. Be on alert for any signs of predatory lending by identifying the warning signs:  

  • Extremely high interest rates. 
  • Exorbitant fees.  
  • Prepayment Penalties  
  • Lack of transparency 
  • Requiring autopay 

What is Loan Flipping? 

Loan flipping is defined by SleeveUp Homes as a predatory lending activity that happens when lenders can convince borrowers to refinance their homes by accepting a new long-term loan.  Consequently, the borrowers end up with costly payments that in return, drain the borrower’s home equity. Predatory lenders achieve this by charging a lower rate for the loan upfront, while then requiring the borrower to make large, lump-sum payments, often two, three, or more years down the road. Protect yourself from loan flipping by:  

  • Knowing what you can afford.  
  • Working with a Credible Lender 
  • Educating yourself. 
  • Never inflating your earnings.  
  • Not betting on future profits.  

If you believe you have identified or fallen victim to mortgage fraud, you can file a report to help protect yourself and other home buyers.  

Looking for a trusted lender? Learn about the benefits of choosing to work with a local mortgage lender by reading our blog. If you have any further questions, contact Direct Mortgage Loans today!