Watch Out for Mortgage Scams
Mortgage Credit Problems Columnist
Mortgage fraud is growing, as more homeowners with bad credit have become desperate to make their mortgage payments. Complaints to the Better Business Bureau about mortgage fraud are rising across the U.S. and are expected to continue to increase as more homes go into foreclosure. Here are some common scams to look out for.
“Mortgage Rescue Companies”
Some people with bad credit are being taken for a ride by so called “mortgage rescue companies” that promise to negotiate with their lender to reduce their monthly payments or avoid foreclosure. While there are companies that can help in this area, some are asking for fees upfront, but give homeowners little or no help, pushing them into an even deeper financial hole. If you have bad credit and are thinking of using a mortgage rescue company, you should receive a notice of your right to cancel the contract and a statement of the terms and exact services you can expect. However, your best bet is to call your lender or a HUD counselor--it’s free.
Inflated Payoff Amounts
Some scams may involve telling homeowners to stop paying on their mortgage and avoid contacting their lender while the rescue company makes arrangements for a plan to catch up on missed payments. But some of these rescue schemes ask homeowners for more than the actual payoff amount to get their loan out of arrears. Because the homeowner has been instructed not to contact their mortgage lender, they end up paying a lot more than they should, allowing the scammer to pocket the money. Again, call your lender. Don't let shame or fear keep you from making that call--these scammers count on it!
Equity Stripping
Another scam involves convincing homeowners to sign over the title--sometimes unknowingly--to their home. Michael Sichenzia, chief operating officer of Dynamic Consulting Services, told CNN Money that, "the scammer promises to save the home by taking title, renting it to the owner and selling it back sometime later. Instead, he strips the equity by charging excessive fees, doing phony renovations and not making the mortgage payments."
The bottom line is that if you have bad credit and are having trouble paying your mortgage, it's always best to contact your lender first to see if you can negotiate a deal. If you really need help, look for a free credit counseling service that is approved by HUD.
About the Author
Francine L. Huff is a freelance journalist and the author of The 25-Day Money Makeover for Women. She has appeared on a variety of TV and radio shows.
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