Federal Deposit
Insurance Corporation

Fall 2013

Protect Yourself From Mortgage Scams

Audio (MP3 8.00 MB)

Let’s say you are a homeowner in financial distress and at risk of losing your home. You may also have heard that the government is requiring mortgage servicers to mail offers of assistance to borrowers who are behind in their payments. Then, an official-looking letter arrives “guaranteeing” to save your home by accessing new kinds of “federal” loans.

Or, you would like to lower your housing costs and you receive an e-mail, text message or phone call promising a very low interest rate. All you have to do to get started is provide some personal financial information.

Do these deals sound good ... or are they too good to be true?

FDIC Consumer News wants to remind you to watch out for scammers who falsely claim to be lenders, loan servicers, financial counselors, mortgage consultants, loan brokers or representatives of government agencies who can help with your mortgage. “These criminals attempt to enrich themselves by preying on vulnerable, desperate homeowners,” said Ron Jauregui, an FDIC Community Affairs Specialist. “If you suspect that you have been targeted by a mortgage scammer, you can protect yourself and your community by reporting it to the appropriate authorities.”

Here are common warning signs of fraudulent offers of mortgage assistance, plus key points to remember:

You must pay a fee to be “guaranteed” a foreclosure rescue or loan modification. No one can guarantee in advance that a mortgage assistance application will be approved. Also, collecting upfront fees, supposedly to cover processing or administrative costs, is questionable and, depending on the circumstances, may be illegal. If you pay the money, chances are you will never see it again and you will not get the promised services.

The company claims that it is approved by or affiliated with the government. “Mortgage crooks like to fool people by presenting fake letters and e-mails that look official or other offers that seem to present fast and easy solutions,” said Luke W. Reynolds, Chief of the FDIC’s Outreach and Program Development Section. “They also may imply that they have been approved by the federal government. When in doubt about an offer, contact your loan servicer — the company that collects the monthly payment for your mortgage, property taxes and insurance — to find out if you may qualify for any programs to prevent foreclosure or modify your loan without having to pay a fee.”

You receive an unsolicited request to divulge personal financial information. Never provide personal information in response to an unsolicited text message, e-mail, call or letter asking you for personal information. Many people think that as long as they don’t share their Social Security number they won’t be victimized. But other information — like your date of birth, loan balance, loan number or other account numbers — may be enough for a scammer to commit fraud or theft.

You are pressured to sign over the title to your home or approve documents that you haven’t had time to read. Predators will say you must act fast to save your home. That may include quickly signing documents, including the title or deed to your home, to be eligible for their mortgage assistance. But if you comply, you may be giving them ownership of your home. You never need to give up ownership of your home to obtain an authentic mortgage modification.

“Scammers rely on distressed homeowners to trust people offering solutions that sound easy or effective,” said Paul Horwitz, an FDIC Community Affairs Specialist. “If you’re having trouble paying your mortgage, don’t communicate with third parties that contact you. Instead, talk to your lender, perhaps after first consulting a trained professional at a reputable counseling agency that will provide free or low-cost help.”

For a referral to a nearby housing counseling agency approved by the U.S. Department of Housing and Urban Development (HUD), a good place to start is the Consumer Financial Protection Bureau (call 1-855-411-2372 or go to www.consumerfinance.gov/find-a-housing-counselor).

You are told to stop paying your mortgage lender and start paying your new “helpers.” The con artist may claim that, to qualify for a mortgage modification, you need to stop paying your lender. Withholding a payment to your lender might sound appealing, but doing so can make matters worse, including further damage to your credit. Also, keep in mind that any money you give to a fraudulent third party will likely disappear. Discuss issues such as these with a HUD-approved housing counselor when evaluating the options for a legitimate loan modification.

Final Thoughts

Be wary of unsolicited offers by third parties, especially if they relate to your home. “The best defense for fighting mortgage scams is to know the signs of fraud and err on the side of caution,” advised April Richardson, a Counsel in the FDIC’s Financial Crimes Unit.

For more information about avoiding and reporting a variety of mortgage scams, not just those involving loan modifications, start at www.stopfraud.gov/protect-mortgage.html, which features tips from government agencies and NeighborWorks® America.