As featured on ABC7 Chicago.
Don't be the victim of mortgage fraudJennifer Litwin on ABC7 ChicagoAs the mortgage market and economy continues to be weak, there is an increase in the number of mortgage fraud cases reported, and a 48% jump in foreclosures last month, alone.

Illinois Attorney General, Lisa Madigan, just filed a lawsuit against Countrywide, the nation’s largest mortgage lender, for issuing and marketing risky and expensive loans. We have some tips on how to avoid getting into this situation and what to do if you find yourself a victim of mortgage fraud.

HOW DID WE GET TO THIS POINT?

  1. Lenders qualifying people who didn’t have the income to buy the home, but encouraging them to inflate their income on their application.
  2. ARMs became popular as “affordability products”– get borrowers in at a low rate but soon after, bump up the rate by several percentage points-resulting in increased foreclosure rates.  Borrowers fooled by low teaser rate.
  3. At Countrywide and other mortgage companies, Madigan is claiming, the lender often didn’t tell borrowers the loan’s true costs, risk and affordability factors.  Told borrowers, simply, “there are no closing costs.”  This was misleading to the borrower.
  4. Loan officer’s compensation at many of these places was tied to the volume of loans sold–the goal being to sell as many mortgages as possible within a short period of time.  The belief is that employers encouraged employees to sell risky mortgages to unsuspecting victims.

SPOTTING MORTGAGE FRAUD

  1. Lender encourages you to provide false info about your income, assets or employment.  You may sense that the lender just wants you to buy that home that you love, but can’t afford.
  2. Mortgage broker/lender encourages you to work with his or her appraiser, inflating the home’s value.
  3. Interest rate is 2-10% higher than market rates.
  4. True closing costs are hidden, but lender tells you that you won’t be able to get a mortgage elsewhere.

AVOID BEING IN A FRAUDULENT SITUATION

  1. Fill in everything, yourself.  Don’t leave blank spaces.
  2. Take your time, and don’t allow yourself to be rushed, when filling out forms.
  3. Always have another person (a friend, lawyer, etc.) look over your documents and read everything.
  4. Don’t lie.
  5. Hire your own appraiser — get a referral.
  6. If found guilty of lying you could have to repay full amount of loan, plus a 6-figure fine, or even go to jail.
  7. Never pay more than 3% for loan fees.
  8. Know all your closing costs upfront.

IF YOU ARE A VICTIM OF MORTGAGE FRAUD OR SCAM

  1. Call the Mortgage Fraud Hotline: 800-437-2838, or the FBI.
  2. If you find yourself not being able to pay your mortgage call 1-888-995-HOPE.
  3. Call your lawyer.
  4. If you are having a hard time making payments, look at the Illinois Mortgage Lending Guide for tips on protecting yourself and your home.  Go to www.illinoisattorneygeneral.gov/consumers/mor_lend_guide.pdf to read more.
  5. Madigan created the Illinois Homeowners’ Referral Helpline at: 866-544-7151 to help homeowners get the assistance they need–open from 8AM-5PM Monday-Friday.
  6. Try to convert an ARM loan to a fixed.

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