Fraud continues to threaten homebuyers, renters and the mortgage industry. The latest report from CoreLogic, a real estate information company, says fraud is on an upward trajectory and estimates that some 13,000 mortgage applications made during the second quarter had indications of fraud.
Because November 13-19 is International Fraud Awareness Week, we're going to review ways to protect yourself and others from the mortgage and housing-related fraud scams Freddie Mac's Financial Fraud Investigation Unit (FFIU) is tracking this year.
- Email theft of money needed to close the loan. Commonly known as "spoofing," scammers are hacking into the email accounts of real estate agents and title companies to get a homebuyer's email address and upcoming closing date. Then, pretending to be the real estate agent or title company, the fraudster sends the homebuyer an email with instructions for wiring the closing costs that will send the money to the fraudster's bank account; meaning, the would-be homebuyer loses potentially tens of thousands of dollars plus the chance to buy a home.
- Mortgage applications with false information. Some fraudsters encourage borrowers to falsify – or let them falsify – information about savings, income, assets or other information to get a mortgage approved. The scammer earns a fee for closing the loan, while the borrower may end up with a debt he or she can't afford, which could lead to default and possibly being charged with fraud.
- Disaster repair scams. Fraud artists often show up after a disaster promising top-quality repairs, but then either overcharge, purposefully do shoddy work, skip town before the job is done or all of the above.
- Phony rental ads on the internet. Fraudsters phish for personal information, rent and security deposits by advertising foreclosures or other properties they don't own as rentals.
- Foreclosure avoidance scams. Be wary of companies promising to fix your mortgage problems for an upfront fee. Remember, anything they can do, a HUD-approved counseling agency or your mortgage servicer can do for free.
You can avoid these and other frauds by remembering a few common-sense tips:
- Never sign mortgage applications or other financial documents unless all the blank spaces are filled in with correct information.
- Resist pressure to exaggerate information or lie on a mortgage application. If you're asked to do this, change service providers.
- Be careful: Think before you act.
- Verify any closing instructions received by email by calling your real estate agent or title company at a number you know is theirs.
- Only share personal credit information online with a trusted retailer/service provider.
- Verify that rental properties advertised on the internet are really for rent. Look up the address on Zillow or Trulia and call the listing agent and/or the property's true owner per public records to verify the rental.
- Never sign a 'quit claim deed' or give the title of a home to anyone promising to rent it back until you can afford to own it again. Once the fraudster has your title, they can evict you and sell your house.
- Borrowers in financial trouble should always contact their servicer or a HUD-approved counselor and be suspicious of too-good-to-be-true offers from so-called mortgage experts.
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