When it comes to signing legal documents, STOP, think and read!

Denver Real Estate News

Loan Fraud has been in the news more often than I care to think.  It amazes me how many  people use their talents to do evil instead of good.  Considering the amount of time it takes to think up a scheme and implement it, I often wonder how much good they could do if they used their talents in a positive way!

Consumers need to be aware of scam artists.  By being aware one can protect oneself from falling into a trap.

What kind of Real Estate Scams Are There?

The Scams are many, more than I can list but here are a few.

  • People who charge you a fee to "Modify Your Loan."  Up front fees for this sort of activity are illegal in Colorado, so if someone is telling you they can get your loan "modified" and they aren't your mortgage lender, they are lying to you. Run the other way.
  • Short Sale Specialist who promise you can stay in your home after they sell it to an investor.  This is illegal also.  If you short sell your home, you must move out.  Don't participate in a scheme to try and stay.
  • Are you short selling your home and collecting rent too?  If you are collecting rent on a home where you are not making the mortgage payment, there is a  name for this.  It is called "Equity Skimming."  The FBI reserves a special room for people who do this.  It's not at the Holiday Inn either.
  • Straw Buyers, have nothing to do with hay.  A straw buyer is when a real person is asked to fill out a mortgage application and go to the closing table in exchange for payment.  The person doesn't actually take ownership of the home, but gets paid to look like a borrower.  Bad guys use this technique to defraud banks out of millions of mortgage dollars, sometimes on homes that don't exist.  Yes, this is fraud too.

How does one Avoid Falling into a Loan Fraud Pit?

On the FBI.gov website there is an excellent article on how to avoid becoming a victim of Mortgage Fraud.  The statements in BOLD are directly from the FBI article on Loan Fraud.

  1. Get referrals for real estate and mortgage professionals when you want to buy or sell a home.  Check their credentials!
    Did you know that all Real Estate Brokers and Mortgage Brokers are required to be licensed by the State of Colorado?  Proof of our Licenses can be found at the Colorado Department of Regulatory Agenices  A brief online search will reveal if the real estate professional or lender you are working with actually holds a license in Colorado!
  2. Do your own research into what other homes in the neighborhood have sold for.
    The most reliable source of sold information is NOT found on ZILLOW or TRULIA or any other commercial website.  The most reliable source are the County Records and the MLS.  Consumers do not have access to the MLS, but REALTORS do.  Your REALTOR should be able to prove on paper what values are in an area. (some exceptions here, i.e.  no recent sold properties make that difficult - but that is another blog topic!)
  3. Beware of "no money down" loans.
    These schemes are typically designed to get people to buy homes they can't afford.  Yes, there is no Santa Claus.
  4. Don't let anyone (ie. a REALTOR, mortgage broker) talk you into making a false statement or lying about where your down payment is coming from.  Think about it, you say to the Judge, my mortgage broker made me do it...How stupid does that make you look?
  5. Never sign a blank document or a document containing blank lines.  Review (READ) all loan documents before signing. This goes for the real estate contract too.  If you don't understand what you are signing, get someone (Attorney) to explain it to you.  Most REALTORS can explain the contract to you, just let them know if you need further clarification.

It is easy to avoid becoming a Loan Fraud statistic, it takes being cautious, understanding what one is signing and working with (listening to) a REALTOR with experience who demonstrates they understand the procedure and can translate it to you.  The process can be complicated, often the process will differ with different types of financing, but in the end the result is the same.

Homeowners and Home sellers can achieve their goals by being informed and taking responsibility for understanding the real estate process.