As the housing and mortgage industries grapple with the business and customer service fallout of the pandemic, the first-ever non-weather-related federally declared disaster, they face another insidious foe: schemes to defraud borrowers.
The Federal Trade Commission has tallied nearly 50,000 reports of COVID-19-related scams, for a loss of more than $35 million since the beginning of 2020. About 3% are related to mortgage lending, according to the FTC’s data. That may seem like a small percentage, but the stakes—borrowers’ ability to keep their homes—couldn’t be bigger.
The 4.7 million borrowers who’ve already sought forbearance on their mortgage (and the newly unemployed seeking forbearance or deferment options each month) are particularly vulnerable to scam artists.
Unfortunately, when something goes wrong, some people go the extra mile to make it worse. The fear roused during a federally declared disaster is just the condition scammers find irresistible. Fraudsters, with the skill of digital marketers, target victims through online ads, email solicitations, and search terms like “refi” or “forbearance.” They can also target people in areas with high unemployment and access public records to find homes in pre-foreclosure.
Scammers might insist homeowners make mortgage payments to them while they negotiate with the lender. Or they might ask homeowners to sign papers for a loan modification, but buried in the pile is a document that surrenders title. Either way, homeowners could lose their home.
The Coronavirus Aid, Relief, and Economic Security (CARES) Act and subsequent stimulus packages provided unprecedented relief to consumers. But because government agencies and lenders had to roll out programs at warp speed, consumers have struggled with confusion and misinformation. Servicers that proactively provide clear information on forbearance and mortgage relief options, as well as fraud education, can help prevent crippling consumer losses, like scam-induced foreclosure, which then ripple throughout the industry.
Resources that can help include CFPB.gov/housing, a new site created jointly by the Consumer Financial Protection Bureau, Federal Housing Finance Agency, and the Department of Housing and Urban Development to give homeowners and renters one place to go for assistance offered by various agencies under the CARES Act. The single source includes information on mortgage relief, renter protections, and COVID-19–related scams. The CFPB also created a video that explains forbearance.
Real estate agents are also warning their clients about the scams that have surfaced since the start of the pandemic, and are sharing these key takeaways with financially struggling homeowners:
- If you know you’ll have trouble making your next mortgage payment, contact your lender immediately to discuss your situation and decide whether forbearance or deferment is right for you.
- Make sure you know what your obligation will be once the forbearance or deferment period ends.
- Never stop making mortgage payments on the advice of a so-called mortgage forbearance expert.
- Never pay any business or third-party for mortgage relief assistance.
- Don’t sign a deed that transfers any part of your property to anyone who makes promises about freeing you from the mortgage obligation.
- Never make mortgage payments to anyone but your lender.
In short, consumers must never let any third party negotiate for them; they must talk to their servicer directly.
Consumers who have privately held loans may be at particular risk, since private lenders have no obligation to follow federal government guidelines on forbearance. Real estate agents typically direct borrowers who can’t make headway with their lender to seek assistance through a HUD-approved Housing Counseling Agency.
Finally, the National Association of REALTORS has been communicating with mortgage lending organizations throughout the COVID-19 crisis to ensure consumers are getting the right information about what to do if they’re having trouble making mortgage payments. A new brochure from NAR, Protect Your Investment, is designed to help ensure homeowners impacted by COVID-19 are working with trusted professionals.