The risk of running into a scam is present with any type of loan; unfortunately, home loans are not exempt from this problem. While expecting and preparing to watch out and avoid scams is vital in any financial situation, it’s essential to be especially vigilant when you are dealing with a loan that is as sizeable and impactful as a home mortgage loan.

There are several ways to spot a potential scam:

• The company insists on an up-front fee to secure loan modification or refinance options on your mortgage. This practice is illegal.
• The company reaches out, uninitiated by you, and tries to pressure you into using their home loan or refinance services. This scam is also known as predatory lending.
• The company reaches out, uninitiated by you, and claims to work for a government loan program.
• The company requests you stop paying a current mortgage you may have and begin a program with them instead.

Scams and schemes to defraud borrowers within the mortgage industry are continually changing. Below are some of the most common home loan scams being seen today.

• Short-Sale Scammers - In this scenario, a fraudulent company will attempt to coerce you into utilizing their services by promising that they can negotiate a quick and effective short-sale with your current lender. The kicker is, they will charge a fee, which is illegal. If you are intending on trying to reach a short-sale term with your lender, always use a legitimate realtor to do so and deal directly with your lender.
• Forensic Loan Audit Scam - This type of assistance may sound nice and beneficial, but it isn’t legitimate. In this scenario, a company may claim to offer auditing assistance and want to review your mortgage for any inconsistencies and to see if they can get your loan improved upon by your lender. They will request an up-front fee, and unfortunately, even if they find something, a mortgage lender is not under any obligation to change or re-write your loan terms. If you feel there is an error in your mortgage terms, or if you would like to see if your terms can be revised, it’s always best to work directly with your lender or utilize a lawyer if necessary.
• Up-Front Fee Mortgage Counseling or Foreclosure Assistance - In this scam, the company will state that they can resolve any loan issues you may be having, thus preventing or fixing any pending foreclosure. They will request an up-front fee and ask that you stop communicating with your lender and allow them to handle all communications from that point. They may even require that you begin making mortgage payments directly to them instead of your lender. Once they have secured a certain amount of money from you, they will cease communication with you and disappear. If you need mortgage assistance, contact your lender or a licensed mortgage counselor for help. Never make mortgage payments to anyone but your lender.
• Foreclosure Bankruptcy Scam - In this scheme, the fraudulent company will make a promise of negotiating your mortgage with your lender to stop any current foreclosure threats or proceedings. They will charge you a fee, and unbeknownst to you, file for bankruptcy to stop any foreclosure proceedings. Unfortunately, using bankruptcy to stop foreclosure is only temporary and does not permanently stop the process; you could still lose your home. Plus, bankruptcy is something that will scar your credit report for years to come and should be avoided if at all possible. If you need assistance with foreclosure, you can contact your lender directly or seek the guidance of your local housing authority for resources available to you.