Mortgage Scams Tips

By: Bill Waters
06/25/2011 10:16 AM ET

Here are the top 3 mortgage scams tips and things to avoid. These tips include everything from the con artist to scams operated by a bogus mortgage company. It usually begins with a simple phone call, just how they got your number is a mystery, but nothing can be great when they approach you.

1. “Equity Stripping” or “Bailout” – The con artist “rescues” the homeowner by helping her get rid of the house by tricking them to surrender the title so she can remain on the property as a renter. She also promised the golden opportunity to buy back the house once things have been “fixed.” In the end, the homeowner can’t afford to buy back the house and the rescuers bleed the house of most (or all of) the equity, which is why this tops our mortgage scams tips.

2. Phantom Help – Here, the supposed rescuer charges very high fees for basic phone calls and paperwork that the homeowner could have done himself. Often, the scammer promises to represent the homeowner to his lenders in an effort to “work things out,” but never follows through. Even worse: the scammer will insist that the homeowner IGNORE notices and phone calls from the lender or its agents, almost guaranteeing that the house will enter foreclosure. By the time the homeowner knows he’s been conned, it’s usually too late.

3. Bait and Switch – In this scheme, the scammers masquerade as legitimate housing counselors, armed with mounds of legal documents — often for new loans that are going to “solve” the homeowner’s problems. In reality, the owner signs forged documents that give the scammers ownership of the home. To make things worse, the victims still owe money for the mortgage, but no longer have the asset.

In one instance, a scammer attached documents to a clipboard, and placed Post-It notes next to the various signature lines. “His victims — some of whom were elderly, or didn’t speak English well — were usually overwhelmed by the documents and also couldn’t exactly see what they were signing thanks to the clipboard.” One of the things the scammer allegedly got them to sign was a “grant deed” that passed their home’s title to a third party.