7. Bait and Switch Loan Scams

Save money by refinancing

How would you like to lower your mortgage payments and save lots of cash each month?

“They made a tremendous offer, and at first I thought ‘too good to be true,'” fraud victim Nerida Cuccia said. Cuccia happened to be in the market to refinance her mortgage.

Ricardo White, the voice on the phone, said he could offer a 3.25% fixed interest rate the first year, and 5% fixed for the remainder of the loan. She told White she was interested and also told him his tone made her hesitant.

“You`re so high pressure. You sound a little bit like you`re forcing me into something,” Cuccia said.

He quickly apologized and because of the attractive rates, Cuccia decided to proceed with the refinancing.

In Cuccia’s case, she was promised 3.25%. In reality, she signed a loan that started at 8% the first year and would go as high as 15%.

Too good to be true rates

There is a saying that if it is too good to be true, it probably is. Even though you do not want to let an opportunity to save money pass you by, you need to be cautious when shopping or applying for a loan. In 2021 alone, the Federal Trade Commission reported consumers lost $5.8 million to fraud.

An example of new mortgage fraud may be that you agree to terms of a loan upon application then the lender advises that product is no longer available. The lender advises you only qualify for another loan product with less than desireable rates and terms.

You may find yourself in the pending purchase process scrambling to find another lender with more favorable rates and terms. You could risk being out of contract purchasing the home and lose out altogether.

How to protect from fraud

To avoid mortgage scams, stay observant throughout your mortgage process, and question what you don’t understand.

Understand the terms: Read through documents, make sure they’re complete and get clarification on mortgage terms along with anything else you don’t understand before signing.

Speak to licensed professionals: Verify the licenses of all the people you work with, including lenders, lawyers and mortgage loan assistance companies on the database of HUD-approved state agencies.

Don’t accept unsolicited offers: Mortgage scam perpetrators often seek out vulnerable targets. You should be suspicious of unsolicited loan offers and maintain contact with your Home Loan Expert or mortgage service provider.

Avoid upfront fees: Don’t pay upfront fees for lending products or services to nonlenders.

Be suspicious of guarantees: It’s illegal to guarantee loan modifications – legitimate companies will disclose they can’t guarantee a change to the agreement.

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