|- A friend or relative told you about someone who helped them make a lot of money--fast--and told you this person can help you too?
- You're in foreclosure? Getting calls and letters from people who say they can help you get cover bills quickly?
- A real estate agent told you to inflate the price of your home drastically and told you not to worry about the change in price?
Sound familiar? If so, you may be a victim of mortgage fraud. Mortgage fraud can take place at any point during a real estate transaction. Appraisers, loan officers, closing agents, lawyers, and even real estate agents have been found guilty of working with fraud facilitators in perpetrating real estate fraud crimes. It does not matter whether the houses sell for $50,000 or $1 million - real estate fraud has happened at all prices and can happen to anyone.
If you are buying a house, find out if the seller has owned it and lived in it. Today, "property flipping" - buying property at a low price, doing some fixup, and selling in a short time at a higher price-- is the most prevalent form of mortgage fraud. This is typically accomplished through inflated appraisals and illegal or forged loan documents.
Some Tips to Avoid Mortgage Financing Scams
1. Know with whom you are doing business. While many real estate agents work within a network of trusted colleagues and legitimately refer buyers and sellers to real estate attorneys, lenders and contractors, not all networks are based on honesty. Make sure your real estate agent is well established in the community as an honest agent.
2. Read and review all documents involved with the sale. Identity theft is sometimes part of real estate fraud. Make sure that you understand everything, and if you have any questions, ask. If you are unsure, or if the answers you are getting do not add up, take the time to ask a trusted professional - CPA, attorney, or someone you know you can trust - to review the documents to make sure they are sound.
3. Do not give in to a high-pressure salesperson. No reputable broker or lender will try to pressure you to take out a loan. If the "deal" does not feel right, investigate everything. High-pressure tactics are generally a sign that something is not right.
4. Beware the "silent second", a scheme where a buyer borrows the down payment from the seller. While the buyer may tell you its okay, it is not. You may be putting yourself at risk by pursuing this kind of a deal.
5. Never transfer the deed to your home to someone without correctly documenting the transaction. Homeowners who are at risk of a foreclosure situation may be solicited to transfer the deed to their home.
6. Walk away from anyone suggesting that you lie on your mortgage application (e.g., encouraging you to inflate your income, exaggerate your work history, etc).
7. Do not sign any blank mortgage documents or any documents, which are incomplete.
8. Do not borrow more than you can afford and beware of those who try to get you to borrow more.
9. Beware of door-to-door salespersons, telemarketers, or e-mail spam ads. These are favorite sales techniques of "con" artists.
10. Walk away from anyone offering mortgage elimination due to illegality of the mortgage industry. This concept has had no legal basis and homes have been lost to this scheme.
Most of the ads in newspapers offering easy, quick cash at the close of the sale of your home are from individuals engaged in mortgage fraud. Be suspicious if the ad or person involved makes incredible promises. If it seems too good to be true, it probably is. Individuals involved in mortgage fraud are generally likable, appear to be extremely successful, and are very good at getting people to do what they want. They are sophisticated "con" artists, usually introduced to the buyer or seller through someone they know in common. This strategy makes the "mark" feel like they are about to get in on a real good thing. However, mortgage fraud is a serious crime, with serious penalties and serious consequences.