Mel Evans, Associated Press
In this March 15, 2008 file photo, a realtor's sign is seen on the lawn of a foreclosed home in Egg Harbor Township, N.J. The sluggish economy and slowly recovering housing market create the perfect environment for mortgage scams, with desperate homeowners as easy prey for scammers.

The sluggish economy and slowly recovering housing market create the perfect environment for mortgage scams, with desperate homeowners as easy prey for scammers.

The crooks make the deal sound attractive and legit. Thousands of homeowners are duped in mortgage scams each year, and con artists don't have to look far for victims, says Yolanda McGill, senior counsel for the Fair Housing & Fair Lending Project, an initiative by the Lawyers' Committee for Civil Rights Under Law in Washington, D.C.

Most of the victims reach out to the scammers themselves through Internet searches, she says. She bases her conclusion on thousands of complaints that her organization has received from mortgage scam victims.

''The people showing up in our databases are people who are looking for help on the Internet," she says.

--- A theft in-'deed'

Lured by promises of a better interest rates and lower mortgage payments, some borrowers end up signing away their houses.

Thieves pose as mortgage professionals or attorneys who pledge to modify or refinance the homeowner's mortgage. The borrower is asked to sign the supposed modification papers. One of the pages in the stack of documents is a deed that, once signed, transfers ownership of the property to the perpetrators or a company related to them.

While many homeowners would be able to spot such an ingenious trick, others don't bother to read or simply don't understand the documents they sign, says Brian Sullivan, a U.S. Department of Housing and Urban Development spokesman.

Often, borrowers are so focused on the numbers, including the new, low interest rate and the monthly mortgage payment, they forget to read the rest of the documents and the fine print.

--- Phantom of the loan mod

Do not pay upfront fees for a loan modification. Homeowners have been warned about this repeatedly through numerous education campaigns. Despite the warnings, scam stories of borrowers who paid $1,000 to $5,000 for a loan mod but received nothing in exchange are widespread.

''People are starting to pick up on the fact that an upfront fee is illegal," McGill says. "But the scammer will say 'we are not charging you for the services but for doc preparation,' or they'll offer you a 30-day money-back guarantee."

Many borrowers fall for the promises, especially when they are dealing with what sounds like a government program. Mortgage scams will use abbreviations and program names like HAMP, HARP, Hope Now, EHLP.

--- Your mortgage has been sold -- NOT

Banks often buy and sell residential mortgages, and con artists take advantage of that. They create fake companies, pretend they are the new owners of your loan and take your payments until you figure out it's a scam. Most borrowers don't learn about the mortgage scam until their actual lender notifies them that their mortgage is in default.

Receiving a letter notifying you that your mortgage was sold from lender A to lender B doesn't always mean a scam. Often, when a mortgage is sold, lender A continues to service the loan and nothing changes for the borrower. But in some instances, the loan buyer becomes the new servicer and borrowers are required to send their payments to lender B instead.

If you ever get a letter stating your loan was sold, verify it before mailing the payment.

''Illegitimate people use legitimate channels," McGill says. "Call your servicer to check. Don't buy into the appearance of legitimacy."

--- Steer clear of reverse mortgage scams

Elderly homeowners are easy targets for scammers. They are more vulnerable and more likely to have equity in their homes.

Fraudsters engineer several types of reverse mortgage scams. Reverse mortgages allow homeowners who are 62 or older to borrow against the equity in their homes without having to make monthly mortgage payments. Normally, the scammer wants to steal the equity in the home or use the senior citizens as straw buyers and borrowers.

''They use sleek marketing campaigns," says Chris Moessner, formerly president of Moessner & Associates, a research firm in Washington, D.C. "They'll say 'we'll allow you to keep your house and you'll be able to pay your bills, but this is the easiest way for you to get cash when you need it.'"

In one scam, con artists recruit an innocent senior to be the fall guy in the fraud. The scammers buy a distressed property, then manipulate the senior into signing the deed, taking ownership of the house. Once the house is in the senior's name, the scammers use an inflated appraisal to get a reverse mortgage. They steal the money, and the senior and the lender get stuck with the loss.


Mortgage rates climbed for the third straight week as they entered the New Year.

Comment on this story

The 30-year fixed-rate mortgage rose six basis points to 4.69 percent. A basis point is one-hundredth of 1 percent.

The 15-year fixed-rate mortgage rose three basis points to 3.73 percent.

The average rate for a 30-year jumbo mortgage rose five basis points to 4.72 percent. A jumbo mortgage is generally a loan of more than $417,000.

The 5/1 adjustable-rate mortgage jumped nine basis points to 3.52 percent. With a 5/1 ARM, the rate is fixed for five years and adjusted annually thereafter.

( Reach Polyana da Costa at Distributed by Scripps Howard News Service)