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Two Homeowner Scams & How You Can Protect Yourself

  • Fraud – A Major Problem
  • Scam #1 – Refinancing Fraud
  • Scam #2 – Phony Workshops & TV Shows
  • Getting Good Information

Fraud – A Major Problem

You might say that scammers are terrible people or that they are just doing what they need to do to get by. Regardless your perspective, one thing that is certainly true is that they are successful in their efforts. Just look at the losses to fraudsters annually. Based on 2009 data from Lexis-Nexis, each year, con artists steal:

  • $190 billion from merchants
  • $11 billion from banks
  • $5 billion from consumers

As you can see, businesses must be especially vigilant about fraud, but everyone is being targeted – and homeowners are no exception.

One organization that is attempting to turn this trend around specific to homeowners is NeighborWorks America, a nonprofit group that educates the public about refinancing fraud and other threats. Barbara Floyd Jones says that a retiree approached her at an AARP event and told her that she had lost $10,000 to fraudsters presenting themselves as federal bureaucrats.

Jones says that woman’s story, sadly, is not isolated. “Consumers are now more aware of scams,” she explains, “but because scams have gotten more sophisticated, consumers are not sure they know how to avoid them.”

Although it’s not an easy landscape for consumers and businesses, knowing the tactics used by scammers can help you protect yourself. Here are two of the biggest ones targeting homeowners.

Scam #1 – Refinancing Fraud

According to data from CoreLogic, 5.4 million Americans were living in houses backed by upside-down mortgages in 2014. In other words, though we are no longer in the heart of the foreclosure crisis, many households are still in severe financial distress.

Dishearteningly, fraudsters consider distress to be blood in the water. They offer help in the form of foreclosure advisory, fake federal refinancing opportunities, and smoke-and-mirrors lawsuits.

Often these instances of fraud grow from a seemingly benign phone call, according to real estate writer Morgan Brennan. If the caller is claiming to be gathering a group of homeowners for a lawsuit, “[h]e might promise the suit could result in lower mortgage payments,” she says. Since that possibility represents substantial stress relief for many homeowners, the caller can often convince them to pay upfront to be part of the settlement. That’s ill-advised. “[W]hile mass rejoinder suits do take place,” Brennan cautions, “lawyers do not typically take their cut until a legal decision has been reached by the court.”

There are also situations in which a scammer will try to sell you their loan review service, supposedly to check if the contract is legal, or even get you to hand over your house’s title.

The most widespread scam is when the caller says that they are affiliated with either the Home Affordable Refinance Program (HARP) or Home Affordable Modification Program (HAMP). Often the fraudster will tell you to stop making mortgage payments, which obviously creates a completely different problem.

Frequently these criminal groups will not ask for money during their initial contact, recognizing that consumers are now more knowledgeable about the swindles. In fact, the actual moment at which a fee is requested is sometimes delayed until the fourth interaction. Regardless when you are asked for money, that’s when it’s best to walk away.

Payment is not necessary if you are working with the legitimate federal programs, Brennan advises. “Foreclosure counseling is free from agencies approved by Housing and Urban Development (HUD),” she says. “It’s also vital to contact your lender — tedious and murky though the process of modification may be — to investigate your options.”

Scam #2 – Phony Workshops & TV Shows

Prior to the crash in the housing market, many spammers were pitching the idea that anyone could be a real estate investor – if they bought their system with all its insider scoops. Today those people are back. People who profess to have experience and success in the real estate market present their ideas at talks, through books, and via the Internet.

Generally, the informational session that is advertised will be low-priced. During the course, the incredibly successful and charismatic figurehead says that he will give you his closely guarded secrets if you stroke a check for the upper-level course.

If you do decide to pay for entry into the premium seminar, it will become obvious that you cannot make money as quickly or easily as was indicated, warns Brennan. Unfortunately, you don’t have any recourse. “[W]hen you enrolled in the courses you signed a release form that prevents or limits your ability to take legal action,” she says. “And that’s the reason many of these workshop gurus continue to operate.”

Some of these people even have their own TV shows! One of the most prominent examples, says Brennan, is Armando Montelongo, Jr., host of A&E’s Flip This House.

Getting Good Information

No one wants to lose money to a scammer. It’s not just a loss of money. It’s also a huge waste of your time.

Time is of the essence, especially when you are buying a home. At Realty.com, we integrate all the basic property parameters with neighborhood lifestyle features and amenities – making it a snap to find the right place to live. Connect to a local home search now.

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