COVID-19: Separating Truth from Mortgage Fraud Schemes

COVID-19: Separating Truth from Mortgage Fraud Schemes

Taylor Ellard
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March 26th, 2020
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Reading Time: 2 Minutes
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While the concept of mortgage fraud is nothing new, it is something that has been increasingly impacting financial institutions year after year. With interest rates dropping and the demand for homeownership increasing, Atlantic Bay believes now more than ever, it is very important that consumers be familiar with the different types of fraud scams that are targeting homeowners.

Mortgage fraud is defined as a material misstatement, misrepresentation, or omission of information relied upon by a lender to fund, purchase, or insure a loan. Mortgage fraud can be classified into two general categories: fraud for housing and fraud for profit.

Fraud for Housing:

This type of fraud is typically represented by illegal action taken by a borrower motived to acquire or maintain ownership of a house.

Fraud for Profit:

Those who commit this type of mortgage fraud are often industry insiders using their specialized knowledge or authority to commit or facilitate the fraud.

Your mortgage is a public record. It is not uncommon for less reputable companies to contact you after a home purchase to offer you additional products and services related to your mortgage. Some of these companies may try to portray themselves as being your current lender or that they’re working with your current lender, or that they are associated with the U.S. government or a U.S. government program. These companies will offer various products, services, and incentives to homebuyers and can end up costing them a lot of money.

Types of Schemes To Look Out For:

Foreclosure Relief

This scam will offer financial relief and options to avoid foreclosure to consumers who are at risk for defaulting on their mortgage loan. Fraudsters will promise to help the consumer save their home and then they will collect fees and/or mortgage payments that are intended to be paid to the lender. In most cases this results in the loan going into default and ultimately foreclosure.

Refinance/Debt Consolidation Scams

Fraudsters will target current homeowners offering lower rates, reduced payments, and incentives geared towards financing terms that appear favorable from what the consumer currently has.

How to Identify & Prevent a Scam

  • If you have any questions surrounding mortgage-related information you are receiving by other companies, please reach out to your mortgage banker to help answer any questions or evaluate options for your mortgage needs.
  • Place a Fraud Alert on your Credit Report Placing a fraud alert on your credit report can reduce the likelihood that you will be the victim of identity theft and could help prevent new accounts being wrongfully opened in your name. This requires creditors who check your credit to take steps to verify your identity before a new account is established.
  • Update your computer and software on a regular basis.
  • Encrypt devices
  • Require passwords
  • Use multi-factor authentication whenever possible

Additional information on recent scams, how to identify attempts by fraudsters, or to report a scam/fraud attempt, please visit: the Consumer Finance Protection Bureau and the Federal Trade Commision.

For more than 23 years Atlantic Bay has been dedicated to giving back to our communities. That dedication will continue through this time of uncertainty and in the months to follow. We encourage everyone to stay safe and following the guidance from the CDC during this time.