Am I in One of the Top Ten States for Mortgage Fraud?
Dear Ali: We want to refinance our floating rate mortgage to a fixed-rate mortgage, but our current bank isn't making loans and we're concerned about mortgage fraud. How do we avoid it?
A: I understand your concern. It's a shame that it took the popping of the housing bubble to shine a light on mortgage fraudsters, but they are everywhere. First, be cautious if you are in one of the FBI's Top Ten States for mortgage fraud:
- California
- Colorado
- Florida
- Georgia
- Illinois
- Michigan
- Minnesota
- New York
- Ohio
- Texas However, also realize that mortgage fraud can be anywhere. Following these common-sense tips will help:
- Don't sign any documents that you can't understand. Mortgage papers, refinancing papers, line-of-credit papers -- they're all a little complicated, but you should be able to make your way through them.
- Don't buy any property that you haven't seen. I tried to be a "flipper" in New Jersey in 2005, and I discovered that a lot of the problem with buying foreclosed properties is that you can't get access to see what's inside. Are the walls still up? Are there even any bathrooms left? If you can't answer these questions about a property, don't take out a mortgage on it.
- Do not sign over your deed. If you think you are "underwater" -- in a situation where you owe more on the property than it is currently worth -- that's terrible, but it's quite possible that you can spend a few years and wait the market out. If, however, you think you might be in danger of losing the house, talk to your bank. However evil you think it may be, your chances with this lender are better than with a "foreclosure rescue" or "loan modification" service that asks you to sign over the deed to your house. Really. If you sign over the deed to your home, the new owners can sell the house without you even knowing it -- and then you're out on the street.
You can find more information at the website for the Federal government's Department of Housing and Urban Development. The good news is that interest rates are currently pretty low -- close to the lowest they've been in decades. So if you have an adjustable-mortgage, the resets might not be that bad. Sit down with a trusted adviser -- your accountant or your lawyer -- and look at the terms of your loan. The most prudent course might be to "ride it out" for a year or so until lending standards ease a little, and then go back and get a fixed mortgage from your original lender.