Refinance scams prey on homeowners looking for a quick fix to their mortgage woes or want a shortcut to refinancing. They promise you’d be able to refinance despite obvious hurdles, only to disappear with your money and personal information or get you to sign up on a loan that is expensive. Avoiding the common traps laid out by scammers is pretty simple by spotting these red flags.
Scam Alert 1: “Your” Lender Has Contacted You for a Refinance
Whether it’s via phone or email, you’ll be contacted by a number of shady characters:
- Persons posing to be your lender offering to refinance your loan. No lender would ever do that. As far as refinance goes, it’s you who have to contact them first. Your lender will also not ask you to sign important documents or make any changes to your loan documents via the phone or email.
- Companies offering to refinance the loan. They promise rock-bottom rates, fast approval and even do away with credit scores. Don’t be fooled. Rates are primarily hinged on the market and your credit score. If they don’t require the latter, where will they base your rate from? Be wary if the company does not disclose the rates and fees when refinancing. They should be upfront about the loan’s closing costs, etc.
- Companies offering to serve as your middle man in refinancing. They ask you to send your payments to them or stop repaying your loan. Only send your payments to your loan servicer and never stop paying or you’ll run into default. The only middleman you’ll need is a mortgage broker who’ll help in finding you a lender. Otherwise, only the lender has sole authority to approve or deny a refinance.
In all, these companies or persons behind refinance scams will try to rip you off. They’d casually ask for your name, address, SS No. and other sensitive information and sell it to another party or steal your identity for other dubious transactions.
Scam Alert 2: Asking for Upfront Fees
Speaking of money, no transaction from such elements will go through unless you wire them a payment so they can “start” the refinance process. However, paying these upfront fees will be of no help to you.
You also can’t be charged for any fee unless you agree to a service and got the result that you desired under the Mortgage Assistance Relief Services rule of the Federal Trade Commission.
Even if you agreed to transact with a company, you are not obligated to pay upfront unless you get the results promised. Always be wary of sending payments to entities unless you have properly verified their existence.
Scam Alert 3: Glaring Grammatical Errors
While letters are still in use, emails allow scammers to reach their next victims easily. The drill of emailed refinance scams is pretty much the same: they’d pose as a legit lender or company offering refinancing and such. They’d ask you to click on a link that would lead to their website.
Don’t reply just yet. Maximize the said email and examine the sender. Next, go over the email, examine the letterhead/logo, and spot any spelling or grammatical errors. Written correspondence from legit companies is usually professionally written and checked for any typos before being sent to clients or customers.
Don’t click on the link, either. It could lead to a phishing website whose purpose is to steal your personal information.
When in doubt, don’t talk to strangers. Don’t sign in on anything that you could land you in trouble. Instead, report to the Federal Trade Commission, the Attorney General in your state, and the Better Business Bureau.
When it comes to refinancing or any other loan-related matters, always contact your lender. There are refinance scams that basically ask you to stop talking to them. The thing is, your lender is the best person to ask about refinance.
Justin McHood is a managing partner at Suited Connector and has been recognized by national media outlets as a financial expert for more than a decade.