Almost everything financial is a victim of some kind or other of scam today, and quite often it is very difficult to recognize a scam deal from a genuine one. Scams are also operating in the mortgage businesses on a large scale. People who are not very much aware of how the mortgage market works are the primary victims of scamsters, and hence getting oneself educated about the terms and terminologies of the mortgage market is one way of getting armed against these scams. In this article, we shall look at some common ways to prevent becoming conned by scamming mortgage providers.
(1) Scams over the internet and telephone
Several fraud mortgage operators advertise over the internet and the telephone. These companies would attract clients by offering unbelievable low rates of interest. Sometimes they work (fraudulently) under big reputable names. People are solicited to respond to these mails or telephone calls by filling in forms. While doing so, they would collect vital financial information about the person such as bank account number, credit card number, social security number, etc. This is all that is required for the frauds to dig in to their victims’ financial assets. Needless to say, there is no loan provided at the end of the day.
(2) Scams providing refinancing loans
People who are stuck in a financial rut are sometimes lured by the refinancing loan advertisers they find over the net or even in the newspapers. These cons would advertise very low rates of interest. But the victims of these smooth operators generally would even lose whatever finances they have.
(3) Scams that swindle equities
Homeowners build up their equities when they own their house for a certain period of time. This is when some scam operators would approach the homeowners and lure them into taking a home equity loan to cash in on the appreciation in their homes. If the homeowner is already finding it difficult to make the original mortgage payments, this could seem to be a very good idea. Some homeowners might be reluctant to go in for this as they might not be able to afford the payments on the equity loan itself. Scam operators could hedge the homeowner to go ahead. As soon as the homeowner misses a payment, the scam operators would foreclose the loan, and the homeowner could lose the roof over his/her head.
(4) Scams operating on loan transfers
If a homeowner has a mortgage and has made quite a bit of payments on it, some scam operators could encourage him/her to refinance that loan so as to have some extra cash in the pocket. Supposing the person accept, the scam mortgage provider could appear again; this time exhorting to take another refinancing loan. On the face of it, the homeowner is happy seeing the lower and lower payments; but the fact of the matter is that there are several fees he/she is paying each time the loan is being refinanced. The application fees, points, prepayment penalties and sometimes even higher rates of interest could make the homeowner pay higher than what was originally being paid.
(5) Scams relating to balloon payments
This could be a very serious issue. Some mortgage providers provide refinancing loans if the borrower is not able to keep up with the repayments. Now here could be a serious loophole. The refinance loan would be lower because the borrower is paying only the interest, and the entire principal would have to be paid at the time of closing the loan. While this would significantly lower the monthly payments, there would be a monstrous balloon payment to be paid at the end. Most borrowers are unaware of the balloon payment, and, quite obviously, they are incapable to pay it on the due date. This means the borrower loses the interest as well as the home for which he/she paid the interest all these years.
(6) Scams that promise mortgage elimination
Mortgage owners that cannot make their monthly payments are enticed by advertisements that promise to eliminate their mortgages completely. They would take a fee in advance and make the signatory fill in several forms, most of which could be phony loan applications. This would achieve nothing at the end, and the fees paid upfront would be forfeited. And to top it all, the person could be committing a serious criminal act by filling in and signing on illegal forms.
These are just some of the obvious scams that intend to cheat the gullible mortgage borrower. However, there are hundreds of other kinds of scams that could operate on a lower or higher level than these, and cause severe losses to the borrowers.
It always pays to be wise; especially if you are buying in the mortgage market. Go ahead only when you have researched on the company and know for sure that it is reputable. Ask about their reputation from their other clients. And, most importantly, do not take a mortgage higher than you can afford. This would put you in a vulnerable position to be attacked by scam mortgage operators.
Adam Heist is the webmaster of
Secured Loan
Many of his articles and essays can be found on the site. Take a moment to visit us today.
This article is free for republishing
Source:
http://www.articlealley.com
Americas Watchdog Applauds American Interbanc for Calling Attention to Mortgage Bait and Switch Schemes Used by Some of the Largest Lenders in the U.S.