Loan Servicing Fraud Explained

Loan servicing fraud is an issue that many homeowners have been faced with over the years. It is a serious problem that could happen to anyone. Here are the basics of loan servicing fraud and how it can affect you as a homeowner.

Loan Servicing Fraud

Loan servicing fraud is one type of fraud that is used to extract money from a homeowner. This type of fraud can also be used to try and force a homeowner into foreclosure prematurely. For example, a loan servicer might tell a client that they owe extra fees and change interest rates on them without their knowledge. Then they use harsh collection tactics to try and get them to agree to a foreclosure.

This most commonly happens to those that are involved with the subprime lending market. These are borrowers that already have bad credit and unscrupulous lenders believe that they can take advantage of them. This process can benefit unscrupulous lenders in a number of different ways. It allows them to take a loss on the property, which helps with they are tax liability. They can also recover the property and sell it to make back their initial investment. Therefore, this can present a real challenge for borrowers that are put in the situation.