Protecting Yourself from Foreclosure and Home-Equity Fraud

foreclosure-new-jerseyThe internet has made mortgage fraud easier than ever today. Two relatively new types of fraud homeowners need to be on the lookout for are foreclosure fraud and home-equity fraud. Foreclose fraud is when you’re in a financial bind and a white knight lender offers to help you out. Home-equity fraud is when a criminal takes out a home equity line of credit (HELOC) in your name.

Here’s how you can protect yourself from both…

What is Foreclosure Fraud?
Homeowners who find themselves in a financial bind are a lot more likely to fall victim to foreclose fraud. Even if you’re laid off from work or you’re injured, you’ll still have to pay your mortgage, otherwise the bank will foreclose on your home. Even if you’ve paid your mortgage on time for 10 straight years, your lender will still expect your mortgage payment on time, no exceptions.

Foreclosure fraud takes place when a homeowner who is struggling to make mortgage payments is approached by a fraudster willing to lend a helping hand. In exchange for hefty upfront fees and transferring the property title, the criminal offers a consolidated loan to cover your household expenses.

Instead of help the homeowner, the fraudsters leave the cash-strapped homeowner in worse financial condition. Unlike legitimate debt consolidation programs, the fraudster hits the homeowner with a double-whammy. Instead of paying off the mortgage and covering household expenses, the criminal will simply ignore the bills and let them pile up and pocket any debt repayments you make. The criminal then remortgages your home and dashes with the cash, leaving the property owner without a home and still up to their ears in debt.

RELATED: Understanding Foreclosure

The best way to protect yourself from foreclosure fraud is to only borrow money from reputable lenders. Foreclosure fraud often occurs online on the World Wide Web. If a loan seems too good to true, it probably is. Mortgage lenders aren’t in the business of helping out homeowners in a bind – if a lender is willing to extend a loan for a large amount at a rock bottom interest rate, it should set off a red flag. 

What is Home-Equity Fraud?
If you have good credit and you’ve built up substantial equity in your home, you’ve the perfect target for home-equity fraud. Fraudsters will use a home equity line of credit (HELOC) to tap into the equity you’ve worked so hard to build up to defraud you of thousands.

Home-equity fraud often starts with identity theft. Fraudsters use stolen identification to apply online for a HELOC in your name. Once the mortgage has been approved, he or she then instructs the lender to wire the funds to their personal bank account, providing their address and phone number in place of yours. The entire fraud can occur without the property owner ever knowing it.

It’s important to safeguard your personal information to avoid falling victim to home-equity fraud. Never toss documents with personal information into the recycling bin without shredding them first with a paper shredder. You should be careful who you share personal information with. You should be especially careful about sharing your social insurance number, especially on application forms. Furthermore, when it comes to ID, only carry around the bare minimum in your wallet or purse. If a fraudster finds it, he or she can start impersonating you right away.

Here are some additional tips offered by Equifax on what you can do if you think you’ve fallen victim to Foreclosure Fraud or Home-Equity Fraud.