Fraud involving straw buyers and reverse mortgages is one of the most common mortgage scams in Utah, according to the Salt Lake City Federal Bureau of Investigation (FBI) and Utah Division of Real Estate. The agencies released a list of the top five mortgage scams.

A “Free” House and HECM Loan

Straw buyers are people who are recruited to purchase properties they don’t actually intend to live in. When reverse loans are involved, seniors may be told they can live in a home for free. The deed to the home is then transferred to them without any exchange of money. After 60 days have passed, arrangements are made for the senior to apply for a Home Equity Conversion Mortgage (HECM). After the person receives a lump sum distribution of HECM funds, the scam artist pockets the money and disappears, leaving the victim responsible for repaying the loan.

Short Sale Fraud

Short sales have become more common as so many homeowners have lost significant value in their homes and need to sell. A short sale happens when a bank agrees to accept less than the mortgage owed from a distressed homeowner who sells a home. “Fraud occurs when a distressed homeowner finds a prospective buyer and they secretly set a low sale price. Unbeknownst to the lender, the buyer is willing to pay more for the property and the homeowner pockets the difference,” according to the FBI statement.

Kickbacks and Mortgage Modifications

Other scams in the top five involve kickbacks where home builders have a too much inventory and offer excessive incentives to buyers. The incentives are disclosed as down payments so it appears to the mortgage lender that the buyer has some equity. Loan modification scams occur when companies charge up to $2,000 to help distressed homeowners with their payments, but don’t keep up their end of the bargain.

The fifth mortgage scam on the list involves affinity fraud. That occurs when scam artists get the trust of people in a specific religious, ethnic, or professional group and get them to invest in some type of investment scheme.

Do Your Research First

In general, homeowners should be skeptical of any one who makes promises that seem questionable or too good to be true. It’s always a good practice to check out unknown companies or individuals who want to do business before getting involved with them. Start with your state attorney general’s office and the Better Business Bureau to check out their reputations.

This entry was posted on Monday, February 8th, 2010 at 8:21 pm and is filed under Reverse Mortgage . You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.