GUARANTEED RATE LAUNCHES EDUCATIONAL SERIES TO SLAM THE DOOR ON HOUSING SCAMS
- In the first of three parts, the national mortgage lender helps home owners avoid mortgage fraud -
CHICAGO (Jan. 23, 2013) – Owning a home is one of life’s biggest financial and emotional investments, which can make home owners and buyers easy prey for scam artists. Guaranteed Rate, the second largest independent mortgage company in the U.S., today launched a series to educate and protect consumers from becoming victims of fraud. The three-part series, “Ripoff Tip-offs: Slamming the Door on Housing Scams,” is a transparent look at the mortgage process, areas ripe for rip-off and protections and resources available to consumers. To kick off the series, Guaranteed Rate is opening the door on mortgage fraud.
Mortgage fraud is a general term for a variety of criminal actions taken to misrepresent information to the home buyer, seller or lender for financial gain. Though industry regulations have helped alleviate some types of mortgage fraud, criminals will always find a way to fleece those in a vulnerable position. Three common types of fraud include appraisal fraud, identity theft and phony relief schemes.
Fraudulent Appraisals can Cost the Home Owner Thousands
An appraisal is the primary component in determining the value of a property, but unscrupulous home appraisers may deliberately overvalue the home for financial gain. Here is how it works:
Appraisers are paid a set fee, no matter the home’s value, however, they may be illegally incentivized to overvalue by the real estate or mortgage professional, who will see an increased commission because of a larger loan. If the home is significantly overvalued, the homeowner may unknowingly become underwater by unnecessarily paying above the value of the home. Additionally, the heightened value may not be realized when the owner refinances or sells the home.
Home owners have a number of ways to protect themselves from appraisal scams:
- Check the appraiser’s license: Individual states are responsible for providing licenses, so ask to see the appraiser’s certificate and take note of the license number to ensure the appraiser has a clean record and that they are working in the state in which they are licensed. Additionally, ask if the appraiser is registered with societies such as the Appraisal Institute, American Society of Appraisers, the National Association of Master Appraisers or the National Association of Independent Fee Appraisers. While society membership is not required, it does offer further credibility for the appraiser. Finally, check the appraiser’s license against the Better Business Bureau’s database to review any complaints that have been filed.
- Understand how an appraiser determines the value: To determine the value of a home, the appraiser considers the structure (e.g., leaks or damages to the exterior foundation, siding and roofing), the interior (e.g., material and quality of flooring, windows, doors, etc.), amenities and upgrades (e.g., central air, smoke detectors, etc.) and front and back yards. Additionally, an appraiser will consider similar homes, market trends and land value. By understanding how the home will be appraised, the consumer will be in a better position to catch any mistakes or oversights, leading to an inaccurate report.
- Accompany the appraiser: By going with the appraiser as the inspection is done on the home, the consumer can see what she/he is taking note of, ask pertinent questions and point out anything the appraiser might miss.
- Obtain a copy of the appraiser’s final report before it is submitted: The appraisal is owned by the mortgage company, however, a buyer has a right to obtain a copy of the report from the loan officer. The buyer and/or home owner should review the report to understand what was considered to derive value and to catch any possible mistakes. Should the buyer have questions about the report, the loan officer should be able to provide full transparency, answer any questions and order a second appraisal if necessary.
“After an appraiser’s licenses have been checked, the most important thing in getting a fair value is to be in constant communication with the loan officer to understand how the appraiser is determining value, usually through sales comparison analysis, and what they’re looking at within the home to derive value,” said Anthony Cummata, vice president of mortgage lending at Guaranteed Rate. “The loan officer should be happy to facilitate a transparent process to ensure you are satisfied with the way the home was appraised, even if it comes in below expectations.”
From Identity Theft to House Stealing
According to CoreLogic’s Identity Fraud Index identity alerts have recently surged with a 44 percent increase from January 2011 to January 2012, with consumers in Nevada, Mississippi, Alaska, Louisiana and Idaho at the highest risk for identity misrepresentation.
With tech-savvy, determined criminals, stealing one’s identity is easier than ever and can cause long-lasting effects and headaches for the victim. Besides ruining the victim’s credit for years to come and potentially incurring thousands of dollars in legal fees to recoup losses, criminals are using false identities to steal houses from legitimate home owners. Here is how it works:
The scam artists determine the house they want to steal – often, it is a vacation or empty home, but not always – then they assume the owner’s identity. Once the identity is stolen, the scammer will create fake IDs and forge the home owner’s signature on property transfer documents, file the deeds with the proper authorities and take possession of the home. The home is then sold to innocent purchasers without the knowledge of the lawful owners.
To prevent identity theft, consumers must be prudent about protecting sensitive information. Following are some ways to guard against identity theft:
- Maintain strong passwords for online banking (e.g., accounts for checking and savings, student loans, retirement funds, credit cards and any other institutions which required a social security number to open an account) and change them often;
- Install security software on computers and mobile devices and keep it updated to protect against spyware and malware, which can lift personal information without the knowledge of the user;
- Review financial statements regularly to identify suspicious activities;
- Sign up for credit report monitoring through a credit bureau, such as Experian, Transunion or Equifax to catch irregularities;
- Shred sensitive documents before discarding;
- Be cautious about giving out personally identifiable information by determining why it is needed, how it will be used and if it is absolutely necessary; and
- Do not keep important documents such as a social security card, birth certificate or passport in a purse or wallet.
If a consumer suspects their identity was stolen, there are a number of steps to take to minimize the damage, including:
- Placing fraud alerts on credit reports;
- Closing accounts that may have been opened fraudulently;
- Filing a complaint with the Federal Trade Commission (FTC); and
- Filing a report with the local police.
The FTC’s website, www.ftc.gov provides detailed information on defending and taking action against identity theft.
Phony Relief Schemes
Home owners facing foreclosure may be the most vulnerable group for criminals looking to lure into their scheme. Companies will target struggling home owners with loan modification offers to lower their rates and save their homes, often promising the help of attorneys or real estate experts. Some conning companies will offer money-back guarantees or claim an affiliation with the government or mortgage lender. Typically, the companies make false claims of relief, while charging thousands of dollars up-front and offering little to no help. This bait-and-switch can drive home owners further into debt. Since 2008, the FTC has brought more than 40 cases against fraudulent mortgage relief companies who have caused hundreds of millions of dollars in consumer injury. 
In 2010, the FTC implemented the Mortgage Assistance Relief Services (MARS) rule to protect home owners from predatory relief companies. The Rule states:
- Rescue companies cannot collect fees until a written offer has been issued from the mortgage lender and accepted by the home owner, outlining new loan payments and terms
- Mortgage relief companies must include the following information in advertising, including telemarketing:
- They are not associated with the government, nor have they been approved by the government or mortgage lender;
- The mortgage lender may not agree to change the loan;
- These companies cannot direct the consumer to stop talking to their mortgage lender; and
- If the company tells the home owner to stop paying the mortgage, it must warn them that by doing so, the result could be losing the home or damaging credit.
For those facing foreclosure, contact the mortgage lender to try to negotiate a new repayment schedule or discuss other options such as forbearance.
Guaranteed Rate’s series, “Ripoff Tip-offs: Slamming the Door on Housing Scams,” aims to inform home owners and prospective buyers on protecting themselves against mortgage scams. The second installment of the three-part series will launch next week. The series will be archived on www.GuaranteedRate.com.
 CoreLogic 2012 Mortgage Fraud Trends Report, December 2012, http://www.corelogic.com/research/2012-mortgage-fraud-trends-report.pdf
 Federal Trade Commission, 10/9/12, “FTC Cracks Down on Phony Mortgage Relief Schemes,” http://www.ftc.gov/opa/2012/10/phonymortgage.shtm