How to Protect Your Finances from Mortgage Scams

Estimated reading time: 4 minutes

Mortgage scams target potential homebuyers, owners at risk of losing their home, or homeowners going through financial hardships. These scams can take many forms, but there are things you can do to protect yourself. To ensure you’re keeping your information and finances secure, we’re breaking down the most common mortgage scams, red flags to look for, and ways to keep safe.

Common Mortgage Scams

Foreclosure Relief

These scams target existing homeowners struggling with financial hardships and may be at risk of losing their home. The scammers may claim they’re from the government or working directly with the victim’s mortgage lender. They will offer to save the victim’s home from foreclosure. Upon agreeing, the victim is charged a large up-front fee by the scammer.

How to keep yourself safe: It may feel scary to talk to your mortgage lender about possible foreclosure, but they’re there to help you! The best way to avoid foreclosure is to speak directly with your lender and then seek help from a Department of Housing and Urban Development (HUD)-accredited housing counselor.

Escrow Wire Fraud

Escrow accounts hold money and paperwork until the conditions of a contract are met, such as a purchase agreement. Escrow wire fraud scams target homebuyers who are just a few steps from closing.

A scammer will contact the homebuyer with instructions on where to wire escrow funds. They often fake documentation and may set up fake websites, email addresses, and phone numbers that are just slightly off from the company you officially work with. Instead of your funds reaching the proper escrow channels, the scammers take your money and disappear.

How to keep yourself safe: Before sending money, go back to your original documentation from your lender. Call the number listed on that documentation to confirm the proper information. Additionally, never send money via a link in an email or text message.

Income or Home Value Inflation

If a mortgage professional is helping you qualify for a home loan by lying about your income or the value of your home, you shouldn’t work with that mortgage professional. Not only is it unethical and illegal, but you wouldn’t be able to afford the home or your monthly payments anyway.

How to keep yourself safe: If you’re reading through the paperwork a lender provided and something seems not right or confusing, have your Loan Originator explain it. If it still doesn’t sit right with you, show it to your Real Estate Agent and attorney. If something doesn’t feel right, it probably isn’t! Never sign any documentation if something feels off or too good to be true!

How to Keep Your Finances and Home Safe from Scams

Safeguard Your Personal and Financial Information

During the homebuying process and beyond, it’s important to protect your financial and personal information. Checking your banking statements on a regular schedule ensures you’ll catch any odd charges soon after they occur. When you’re applying for a loan, be wary of any unsolicited offers or incentives. Even if they don’t sound too good to be true, always confirm incentives or offers with your Licensed Loan Originator.

Look Up Licensing Information for Experts You Work With

The NMLS system, also known as the nationwide mortgage licensing system, is a database of all licensed mortgage companies, Mortgage Loan Originators (MLO), and any other financial institution that may originate funding, such as banks or credit unions. Before signing or agreeing to anything, be sure to look up their NMLS number on the official Consumer Access website to ensure you’re working with a certified and licensed Loan Originator. Consumer Access also lists any regulatory actions taken against a licensee.

Read Your Full Contract—Even the Fine Print

There is a lot of paperwork to sort through and sign as you go through the home finance process. Be sure to read each bit of paperwork carefully and include the fine print.

Ask your real estate agent, your attorney, or your lender for clarification if something on your paperwork doesn’t make sense. As members of your homebuying team, they should be able to shed light and explain any factors you can’t understand.

What to Do if You Think You’ve Been a Victim of a Mortgage Scam

If you think you’ve been a victim of a mortgage scam, don’t lose hope! There are still important steps you can take to ensure your finances and home are protected.

• Contact your mortgage servicer or lender and explain what you think has occurred.
• Report suspected fraud to the Federal Bureau of Investigation, the U.S. Attorney’s Office, the Federal Trade Commission, the Consumer Financial Protection Bureau, and state and local authorities.
• Talk to a certified counselor from the U.S. Department of Housing and Urban Development about what resources are available to you.

The sooner you report suspected fraud, the faster you’re on your way to recourse what was taken from you.

Protected Home Financing

By using a Licensed Loan Originator from Homestead Funding, you can move confidently through the mortgage process while knowing your information is protected. When you’re ready to begin your home financing journey, contact us.