There are predators of nearly every industry but when it comes to the mortgage industry, a potential homeowner can lose big time financially if taken for a ride by a professional scam artist.

Due to the recession and the tanking of the mortgage and housing industries, many current homeowners may also find themselves in a predicament a good con artist will target.  Desperate times can trigger the increase of mortgage-related scams.

Breakdown of Mortgage Scams

There are three basic types of mortgage schemes a con will use. The general purpose of the cons are to acquire a victim’s home or to gain access to as much of the equity in a home as possible. Unfortunately, due to the changing nature of the scams, it is difficult for the legal system to protect everyone fully as laws do not always exist that cover the various growing scams.

Here are the top three mortgage scams to watch out for:

Inflated Assistance Claims

In this type of case, the con will promote services aimed at ‘rescuing’ the homeowner from impending foreclosure or other legal action. Typically, a very high upfront fee must be paid with a promise by the con to undo the damage. The con agrees to represent the homeowner in solving their mortgage issues directly with the lender. What really happens is a homeowner relies on the con to do the job they promise. This often results in no communication directly between the homeowner and the lender. Correspondence is ignored based on the con handling all of the details. The con on the other hand does nothing to prevent foreclosure and by the time the homeowner truly uncovers the con, their money is gone and they are in worse trouble with their lender than when they started the process.

How to Avoid the Scam: You can avoid being a victim of this scam by realizing you can do what it takes to get back on track with your lender by contacting them directly and working out a negotiation suitable for your financial situation. The only person that may truly help you in this kind of situation would be your personal attorney who can advise you of your rights. There is no easy button for solving mortgage loan issues.

Equity Stripping

This type of mortgage scam involves a con who promises assistance in offloading their home. Part of the deal involves the homeowner signing over the title to their home with an arrangement the homeowner can then rent the home from the new owner until they are more financially stable. If the scam remains undetected during this type of arrangement, it will be revealed when the home tries to buy back the home and finds they can not afford it. Cons will have also bled out all of the equity in the home by this time, leaving the homeowner without a home.

How to Avoid the Scam: Whenever an individual or a company offers to rescue you from a bad mortgage situation, it is likely that if it sounds too good to be true, it usually is. The only way to prevent a foreclosure is by dealing with your lender directly to modify the terms of the mortgage if the homeowner is eligible. Never sign any documents not reviewed by an attorney or that you have not read yourself.

Bait–n-Switch

This scam involves cons who represent themselves as housing counselors. They tend to carry tons of legal documents promoting their abilities to fix the mortgage problems of a homeowner. While some preliminary counseling may occur, the con is generally trying to get the low down on the situation of the homeowner. The more desperate they are, the more likely they are to sign. The documentation will be complex and hard to follow but in essence will turn the home over to the con legally. Adding insult to injury, the mortgage on the home is still owed by the homeowners who now have no legal claim to their house. This type of scam particularly affects the elderly, those who do not speak English well, and low income families who need immediate financial help.

How to Avoid the Scam: Again, signing any documentation you do not understand is your biggest mistake. Cons are incredibly good at what they do and their pitch of promises to help is very strong. The scams can seem foolproof but don’t be fooled. Never feel pressured into signing any documents. Ask to keep a copy to go over with your attorney and you’ll likely see the con move quickly for the door.