Buying a home is a long and complicated process — and these days, with increasing mortgage rates, it's even more complicated than usual.

There's a lot of confusion in the real estate market and scammers are looking for all possible ways to take advantage of unsuspecting homebuyers. In 2022, consumers reported losing more than $3.8 billion to investment scams (including mortgage scams), according to the Federal Trade Commission. And that doesn't include money that was not reported!

Mortgage scams are growing and can be difficult to detect. They are designed to deceive individuals who are involved in the mortgage process, including homebuyers, lenders and existing homeowners as they seek to refinance or use their home equity. These scams exploit the complexity of mortgage transactions, possible inexperience and the emotional attachment people tend to have in their homes.

There are several variations of mortgage scams:

1. Foreclosure rescue scams. In this variation, scammers target homeowners who are facing foreclosure with the promise of saving their homes by offering assistance with mortgage payments. They may ask for upfront fees or transfer the property title, leaving the homeowner at risk of losing their home and any equity they may have.
2. Loan modification scams. Here, fraudsters pose as mortgage modification experts to charge fees for services they never provide. They may promise to negotiate lower interest rates or better loan terms, exploiting homeowners’ desires to reduce their monthly mortgage payments.
3. Bogus mortgage scams. In this scam, fraudsters target new homebuyers, posing as mortgage lenders and offering a loan at a favorable rate. If the target has already chosen a lender, they may spoof the authentic lender’s logo and phone number and collect the victim’s down payment along with other fees. Unfortunately, if the target makes these payments, they’ll be out the money they’ve saved up for the actual purchase of their new home.
4. Equity stripping. In this scheme, scammers target homeowners with substantial home equity and encourage them to take out a high-interest loan against their property. Then, they disappear with the borrowed funds, leaving the homeowner burdened with additional debt and at risk of losing their home.
5. Identity theft. In mortgage-related identity theft, scammers use phishing and other means to obtain personal and financial information from targets and use these to secure a mortgage in their name. This compromises the victim’s credit while putting them at risk of legal consequences due to the fraudulent activity.

Follow these tips to avoid falling victim to a mortgage scam:

• Research lenders thoroughly. Never sign a contract with a mortgage lender, or related service provider, before you’ve researched them carefully. Check their credentials, licenses and online reviews and ratings. You can also verify their legitimacy by contacting the Nationwide Mortgage Licensing System & Registry. You should only work with licensed professionals.
• Be wary of upfront fees. Legitimate lenders typically do not ask for upfront fees before providing a service. Beware of anyone requesting payment before delivering the promised assistance.
• Read and understand all documents before signing. Carefully review all mortgage-related documents, contracts and disclosures. If anything is unclear, or seems suspicious, seek legal advice before proceeding.
• Be wary of unsolicited offers. When presented with unsolicited offers or aggressive sales tactics, proceed with extreme caution. Legitimate lenders and professionals typically do not cold-call or pressure individuals into making hasty decisions.
• Seek independent advice. Consult with trusted professionals, such as real estate attorneys or financial advisors (including the financial providers who work with CommonWealth One), who can provide you with objective guidance. They can help you identify potential scams.

As a member, you have access to great rates, solid advice and assistance on helping you through the complicated mortgage process. And, if you are behind on your mortgage or having trouble making your house payment, you are not alone. There are steps you can take to get back on top, and our partners at GreenPath can help with free foreclosure prevention counseling. Take the first step and give us a call or stop by a branch today!