Mortgage Concepts is a regular video series covering best practices and compliance education for California mortgage originators. This video covers common mortgage relief scams that mortgage originators are likely to encounter in their business. Visit firsttuesday.us for course credits to renew your NMLS license.
common mortgage relief scams
Financially vulnerable homeowners, such as those seeking mortgage assistance relief services, are prime targets for scammers. As a mortgage loan originator, you are often the first line of defense and education for homeowners against this type of fraud. Let’s take a look at today’s most common mortgage relief scams.
Scammers use a variety of tactics to find homeowners in need, including sifting through public foreclosure notices and posting misleading advertisements online. They use simple but potentially deceptive messages such as:
“Stop foreclosure today!”
“We have special relationships with banks to expedite approvals.”
“Full Money Back Guarantee!”
Sound familiar? Scammers lure victims with similar promises in illegal mortgage ads. Mortgage Conduct and Practices Advertising Rules.
Scammers tell consumers that for a fee they will negotiate with the lender to reduce the consumer’s mortgage payment or save their home from foreclosure. They can claim to be lawyers or represent law firms. We may also instruct consumers not to contact lenders, lawyers, or credit counselors. Instead, the scammers insist on accepting mortgage payments directly while negotiating with the lender. and disappear.
example: “forensic loan auditwas the most popular mortgage modification scam during the 2008 subprime mortgage crisis.
In exchange for an upfront fee, a so-called forensic loan “auditor” offers to review a consumer’s mortgage for lender compliance. The “auditor” said consumers could use the report to avoid foreclosure, expedite the mortgage modification process, reduce the amount owed, or cancel the mortgage. I’m claiming
According to the Federal Trade Commission and its law enforcement partners, forensic loan audits, even if performed by a licensed professional, are not the most effective way for consumers to obtain loan modifications or other foreclosure relief. There is no evidence that it helps.
of rent-to-buy scheme, Scammers instruct consumers to surrender ownership of their homes as part of a deal that allows them to rent the property and buy it back later. They argue that relinquishing ownership allows borrowers with better credit ratings to raise new funds and prevent foreclosures.
However, the terms of these deals are so unfavorable that redemption is not possible. Consumers lose their homes and scammers walk away with their money. Worse, the original owner is evicted when the new borrower defaults on the loan.
As a variation, scammers raise rents to evict consumers, leaving “rescuers” free to sell their homes.
in a similar scam known as stock skimmingscammers offer to find a home buyer, but only if the consumer signs the deed and moves out.
They promise to pay the consumer a portion of the proceeds from the sale of the home, but when the consumer hands over the deed, the scammers simply rent out the home and pocket the proceeds while the lender forecloses on it. .
Transferring the deed does not transfer the mortgage balance, leaving the consumer with a bag of unpaid mortgages.
and decoy sales Scams, scammers give consumers paperwork claiming they must sign in order to get another loan to bring their mortgage up to date. But buried in the stack are documents that hand over ownership of a consumer’s home to a crook in exchange for a “bailout” loan.
Scammers beware: The Consumer Financial Protection Bureau (CFPB) can seek civil penalties and financial relief for violations of Regulation O. State attorneys general also enforce this section. [12 CFR §1015.10]
