Mortgage – Text
Check unknown vocabulary before you read the text:
Perceive – to recognize
Rip-off – a theft
Compile – to put together
Scam – fraudulent business scheme
Reverse mortgage – A type of mortgage in which a homeowner can borrow money against the value of his or her home. No repayment of the mortgage (principal or interest) is required until the borrower dies or the home is sold.
Straw buyer – a person who makes a purchase on behalf of another person
Con artist – a preson who swindles you by use of fraud
Fraudster – a person who commits a fraud
Down payment – A type of payment made in cash during the onset of the purchase of an expensive good/service. The payment typically represents only a percentage of the full purchase price
Convince – to make somebody believe
Bailout – a rescue from financial difficulties
Incentive – a stimulus
Affordable – inexpensive; something you can afford
Affinity – a natural attraction
Unwitting victim – a peson who does not know about the fact they help ruin themselves
Mortgage scams
When given the opportunity, criminals will target whom they perceive as the weakest among us. The Salt Lake office of the Federal Bureau of Investigation and the Utah Division of Real Estate have compiled a list of the potential top five mortgage related rip-offs in 2010. Chief among them: a reverse mortgage scam targeting the elderly.
"Scam artists are always looking for new ways to reinvent the same crime," said Michelle Pickens, special agent and mortgage fraud coordinator with the FBI. "The reverse mortgage scam is based on the 'straw buyer' model where they use senior citizens … against their own mortgages."
Reverse mortgages can be a legitimate way for homeowners to take equity from their homes without a monthly payment, which can be especially useful to seniors who need supplemental income during retirement. Unfortunately, con artists sometimes convince seniors they can live in a home for free, obtain a home loan under the occupant's name and disappear with the equity, while leaving the victim to repay the mortgage.
Others schemes to be aware of include short-sale fraud, in which a homeowner and a lender agree to sell a property for less than the mortgage amount. The fraud occurs when a distressed homeowner finds a prospective buyer and they secretly set a different sale price. While the lender does not know, the buyer is willing to pay more for the property and the homeowner pockets the difference.
Another "kickback" scam is the builder bailout, which is more common in areas affected by a large surplus of unsold properties. A homebuilder offers excessive "incentives" to a buyer, but the incentives are disclosed as a down payment, leading the lender to believe there is equity in the property. Under those circumstances, the builder and the buyer are committing fraud.
Fourth on the alert list are loan modifications in which companies charge up to $2,000, promising to make a homeowner's mortgage payment more affordable. But some homeowners report that they didn't get what they paid for.
The final scam on the list is affinity fraud, where con artists pretend to be members of or exploit their membership in a particular religious, ethnic or professional group. They often enlist respected community or religious leaders from within the group to spread the word about the scheme. Many times those leaders become unwitting victims of the fraudster's plan.