Top 5 Home Loan Scams

Recent headlines about the troubled subprime lending industry are making Americans more aware of the consequences of risky lending practices. But unscrupulous lenders and scam artists continue to prey on unsuspecting loan shoppers and homeowners.

Unfortunately, loan-related scams aren't restricted to tricking consumers into loans with outrageously high interest rates. Today's sophisticated scammers are using loans as a vehicle to do everything from stealing sensitive personal information to virtually stealing a credit-challenged homeowner’s own home. The mortgage experts at Loan.com have identified five top scams that all consumers - mortgage shoppers and homeowners alike - should be on the look-out for.

1. Unsolicited phone calls
Americans across the country have reported receiving phone calls from telemarketers posing as representatives from well-known organizations such as Fannie Mae offering to refinance loans at low rates. These "representatives" often ask for personal information, claiming they need it to qualify a victim for a loan. This information is then used to steal a victim’s identity.

Loan.com's Advice: Be wary of any phone call offering remarkably low interest rates on loans, especially if you have registered your phone number with the Do Not Call Registry. Most major nationwide lenders do not solicit business over the phone. Never give out personal information over the phone unless you are absolutely sure who you are speaking with.

2. “Helpful” contractors
Many homeowners have reported contractors – often roofing or remodel professionals – approaching them with an offer to perform upgrades on their home at a reasonable price. These contractors offer financing through low-interest loans. It’s not until after signing numerous forms that too many homeowners realize they have signed off on a high-interest home equity loan, and that the contractor has been hired by unscrupulous lenders to sell loans, not improve homes.

Loan.com’s Advice: It’s fine to make improvements to your home, but do so on your own terms. A contractor appearing on your doorstep out of the blue should be a red flag, as should high-pressure sales pitches that focus on “easy” financing options.

3. Unexpected change of lenders
With the lending industry constantly evolving, it’s not uncommon for a mortgage to get transferred to a different lending agency more than once over a period of years. But some homeowners have received official-sounding but fraudulent letters informing them that their mortgage has changed hands and instructing them to mail payments made out to a new organization to a new address.

Loan.com’s Advice: Always confirm any major mortgage payment changes with your current lender. Many organizations will notify you of upcoming changes months in advance, and will provide contact phone numbers and Web resources for more information. Be skeptical of any unexpected letter telling you to immediately mail payments to a different location or organization.

4. “Rescue” agencies
Scam artists are using public records to identify homeowners facing foreclosure. They then approach desperate homeowners with an offer to help them out of their financial situation by signing deeds transferring the title of the home to an “interested buyer” for a short period of time. In reality, the transfer is permanent and the “buyer” is fraudulent, often created out of a stolen identify. The “buyer” takes out a second loan for the current value of the home and pays off the original mortgage, keeping the difference. The “buyer” then disappears and stops making payments on the second loan, throwing the home into foreclosure and leaving the original homeowner with nothing.

Loan.com’s Advice: If you’re facing foreclosure, contact your lender to review all of your options. Be extremely wary of any unsolicited individual or agency that appears with promises to help you out of your situation – especially if it involves transferring titles.

5. “We finance anyone!”
The classic predatory loan, mostly targeted at people who don’t yet own a home. Often advertised in newspaper ads, on fliers posted on telephone poles, and online through banner ads and spam e-mail, these lenders provide loans to credit-challenged consumers at extremely high rates. Many of these lenders expect homeowners to eventually be unable to make payments, allowing lenders to seize homes or refer homeowners to an affiliated second predatory lender.

Loan.com’s Advice: Though unethical, these predatory loans are legal. Be absolutely sure you are financially prepared to purchase a home. When you’re ready, check with agencies such as the FDIC, the Federal Reserve Board of Governors, and use resources like the ones on this site and BestRate.com to find a verified lender.