Lenders have made tight restrictions for obtaining mortgage loans, forcing homebuyers to spread out their options for including non-conventional funding sources. With this being the case, a large number of scams have evolved targeting anxious borrowers. If you fail to stay away from these scams, the result could be criminal charges, fine or foreclosure.
Prior to searching for the next home loan, defend yourself by gaining as much knowledge as possible regarding the scams that are currently in action. By going through the following modern-day scams in loan, you will be ready for identifying the signs of a possible scam at an early stage.
The Deceitful Application
A majority of homebuyers know that rendering false details in a loan application is unlawful, but what would happen if the borrower does not know about it? This may not occur in a stern lending atmosphere, but there are cases wherein real estate brokers became so desperate to sell, that they manipulated the loan by utilizing false income statements.
If the homeowner keeps a record of his documentation, he most likely would not be considered responsible for the distortion. But there is a reason behind the income requirements being in place. By distortion of the income of the borrower, the loan might have been equipped with conditions which are quite beyond the payment capability of the homeowner. This might lead to a foreclosure in the long run. With the help of online calculators, a home shopper can comprehend the maximum and minimum that he is capable of affording on the basis of the debt-to-income ratio of the family.
The Scam Related to Loan Modification
Homeowners who are close to foreclosure, respite can be obtained in the shape of an offer of loan modification. These homeowners are promised the world by shady lenders in exchange for an up-front charge. However, homeowners fail to realize that this is an unlawful practice, as per the MARS (Mortgage Assistance Relief Services) Rule of the Federal Trade Commission. Attorneys are allowed to ask for fees so long as they cater to FTC requirements. However, other scams include individuals who pose as attorneys for charging fees.
A different kind of loan modification includes a relief entity transferring the payments of the homeowner to them, instead of the original lender. Homeowners incorrectly suppose that this money is going for the monthly mortgage, but actually it is being pocketed by the scammer. Homeowners are always advised to send payments related to mortgage directly to the lender.
The Rent-to-Buy Scam
The rent-to-buy scam is another fraud making desperate homeowners the victims. In this case, a lender allows the homeowner to stay in his house in exchange of handing over the house. Consequently, the homeowner is transformed into a renter in the home of the lender. The scammer usually deceives the homeowner into thinking that he can purchase the home back in due time recommence mortgage payments. The reality is that when the time comes for the original homeowner to take the loan back, it is often found that the terms designate an unreachable cost as against the income level.