Imagine wiring thousands of dollars to a “lender” only to realize he disappeared with your money. Or perhaps you handed over a prepaid debit card to cover upfront “fees” for a loan. Now you realize you just gave away your debit card to a scam artist.
This is a reality for a victim of mortgage fraud.
In 2018 over 11,000 victims reported real estate or rental fraud to the FBI’s Internet Crime Complaint Center. The resulting losses totaled over $149 million. It’s your duty to protect yourself and do your research before signing any documents or releasing private information.
After reading this, you’ll know how to avoid mortgage fraud and legitimate resources that can help you verify mortgage companies.
Red Flags Your Dealing With a Scammer
They Don’t Question Low Credit Scores
If a lender guarantees you a loan without looking at your credit score, you’re dealing with mortgage fraud. These companies typically prey on individuals with credit scores below 620.
Any legitimate company should be concerned about your credit as they want to make sure you can pay off the loan. However, as fraudulent companies never intend to give you a loan in the first place, this information is irrelevant to scammers.
If you have poor credit, check your eligibility for FHA or VA loans. If you have poor credit, check your eligibility for FHA or VA loans. These government-backed loan programs are designed to help individuals with lower credit scores or limited financial resources to still be able to qualify for a mortgage. The FHA loan, insured by the Federal Housing Administration, and the VA loan, available to eligible veterans and active-duty military personnel, provide more flexible lending criteria and lower down payment requirements compared to conventional loans. It’s important to explore your options and compare the different loan programs to find the best fha loan in Florida or the best VA loan in Florida that suits your specific needs and financial situation. Consulting with a reputable mortgage lender or broker can help you navigate through the available loan programs and find the one that offers the most favorable terms and conditions for you. Don’t let poor credit discourage you from pursuing your homeownership goals – explore the possibilities of FHA and VA loans in Florida and take steps towards securing your dream home.
They Require an Upfront Fee
To be clear, legitimate lenders do collect fees upfront. For example, it could be an application, credit report, or appraisal fee. However, lenders deduct these fees from the loan you are given rather than requiring you to pay them ahead of time.
A legitimate lender does not require you to pay fees before handing you the money as this is illegal. The only exception is charging a small fee ($15-30) to pull up your credit report fee.
Fraudulent fees range from $100 to thousands of dollars, and the company may give it a name like a “loan origination fee” or “loan insurance fee.”
Be wary of anyone asking for a prepaid debit card as well. Mortgage fraud professionals know that debit cards are essentially untrackable, and you can’t report it stolen if you’ve handed it to them.
They Don’t Ask For Your Monthly Income
A legitimate lender wants to be sure that you can pay your loan. You should be concerned if the lender doesn’t ask you questions about your monthly income.
Only about 28% of your gross monthly income should go towards your mortgage payment. If you know that the mortgage is more than 28% of your monthly income and the lender doesn’t comment, consider doing more research on your lender.
They Don’t Have a Strong Online Presence
Most legitimate lenders don’t need to market by phone or email as they generate business through their website and referrals. Check their overall online presence and look for reviews on sites like the Better Business Bureau, Yelp, and Google. You should also be able to find a physical address for their business. A PO box is a major red flag.
In addition, look at the quality of their website. Does it have a secure symbol (the lock) like the one below?
This symbol signifies that the website protects your information from identity theft. While not all legitimate websites have this, it’s reassuring if your lender does have it.
The Lender Isn’t Registered
Lenders and brokers are required by the Federal Trade Commission (FTC) to be licensed in the state they practice in. Check on their website that they are licensed in your state and verify it with your attorney general’s office.
They Never Provide a Loan Estimate
The law requires mortgage lenders to give mortgage applicants a loan estimate (previously called a Good Faith Estimate) three days after applying. This form is a breakdown of cost estimates and allows applicants to compare lenders. You can compare land survey and title insurance prices as well as loan charges and third-party fees.
Spend some time shopping around. Even if you have bad credit, don’t be fooled by advertisements that promise unrealistic terms.
Prior to accepting any loan, consider consulting a financial advisor. The National Association of Personal Financial Advisors (NAPFA) is a great place to find a quality financial advisor.
In addition, try to learn from websites that end with .gov. There are many mortgage frauds with websites that pretend to be a government program, though none of them will be able to obtain a .gov URL.
If you are a victim and want to know how to report mortgage fraud, contact a mortgage fraud lawyer today.
About the Author
Ryan B. Bormaster is the managing attorney at Bormaster Law. The law firm practices in a number of areas but specializes in 18 wheeler accidents, accidents with commercial vehicles such as work trucks, and catastrophic injuries of all kinds.