Paul Sanchez
When applying for a mortgage, applicants give lenders access to their credit report, which includes personal information such as their name, address, and phone number. Credit agencies then sell this information to other lenders, resulting in applicants receiving unsolicited solicitations and spam from various mortgage providers. While not all unsolicited correspondence is fraudulent, consumers should be cautious of scams, such as those offering mortgage protection insurance, lower interest rates, or requesting additional personal information. To avoid these, individuals can opt out of receiving offers for credit or insurance through websites like OptOutPrescreen.com.
| Characteristics | Values |
|---|---|
| Reason for spam | When applying for a mortgage, applicants give the lender approval to pull their credit report. Credit agencies then sell this information to other lenders. |
| Type of spam | Unsolicited emails, phone calls, and texts from companies misrepresenting themselves as mortgage providers. |
| How to avoid | Research warranty providers and plans carefully before agreeing. Consult with a trusted insurance advisor or your lender to explore legitimate options. |
| Examples of spam | Offers for mortgage protection insurance, home and appliance warranties, lower interest rates or payments, and home-sale record processing. |
| Risks of spam | Scams, fraudulent activity, and predatory lending practices. |
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What You'll Learn
Unwanted solicitations from other mortgage providers
When consumers apply for a mortgage, they give the lender permission to access their credit report. Credit agencies are notified of the applicant's interest in a mortgage loan, prompting some agencies to sell applicants' public information to other lenders. This information includes the applicant's name, address, and phone number. Consequently, applicants may experience unwanted solicitations from other mortgage providers. While some lenders may inform their clients of this practice, they are limited in their ability to prevent it, as sharing applicants' public information with credit agencies is necessary for financing.
Following a mortgage application or home purchase, consumers often face an influx of junk correspondence and spam phone calls. These unwanted communications come from companies attempting to sell unnecessary products or services, such as mortgage protection insurance. While mortgage insurance is sometimes built into a mortgage, particularly for borrowers who make a small down payment, it is not a requirement. Lenders are mandated to disclose any insurance requirements upfront, typically involving homeowners insurance or private mortgage insurance (PMI). However, some companies may misrepresent themselves as mortgage providers and pressure consumers to purchase unnecessary insurance.
To avoid falling victim to such scams, consumers should exercise caution when evaluating the legitimacy and suitability of offered services. Official-looking letters or emails may claim that mortgage protection insurance is mandatory to cover loans in the event of death, disability, or job loss. It is important to remember that lenders are required to disclose insurance requirements in advance, and mortgage protection insurance is optional. Rather than hastily agreeing to unsolicited offers, consulting a trusted insurance advisor or lender can help explore legitimate options.
In addition to insurance scams, new homeowners may encounter fraudulent offers for home and appliance warranties, home-sale record processing, and lower interest rates or payments. These scams often attempt to charge fees for services that are standard byproducts of the home-buying process, such as accessing home deeds. Some companies may also pose as the homeowner's mortgage provider to offer special deals on interest rates or monthly payments, only to redirect them to a different lender.
To mitigate unwanted solicitations, consumers can utilize resources like OptOutPrescreen.com, the official Consumer Credit Reporting Industry website. This platform enables consumers to opt out of receiving offers for credit, loans, or insurance. Additionally, Catalog Choice assists in removing individuals' names from mailing lists, reducing the influx of junk mail. By proactively managing their preferences and exercising vigilance when assessing offers, consumers can better protect themselves from unwanted solicitations and potential scams.
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Mortgage protection insurance scam
When consumers apply for a mortgage, they give the lender approval to pull their credit report. Credit agencies are then notified that applicants are interested in a mortgage loan, prompting some credit agencies to sell applicants' public information to other lenders. This basic information may include a consumer’s name, address, and phone number. As a result, applicants may receive unwanted solicitations from other mortgage providers. Although thoughtful mortgage lenders may make their clients aware of this practice, there is little lenders can do to prevent it.
Most junk correspondence following a mortgage application and new property purchase relates to credit cards, loans, and insurance. Unscrupulous companies can use this information to misrepresent themselves as mortgage providers and attempt to get consumers to buy unwanted products or services. They may also ask new homeowners to provide additional personal information that’s not available through the public record. Not all unwanted correspondence related to a home purchase is fraudulent, but consumers should exercise caution when assessing what services are legitimate and suited to their needs.
One of the most common scams that new homeowners encounter is the mortgage protection insurance scam. Shortly after closing, you might receive an official-looking letter that appears to come from your mortgage lender or another legitimate institution. This letter will often suggest that you are required to purchase mortgage protection insurance to cover your loan in the event of death, disability, or job loss. While mortgage protection insurance is a legitimate product, it is never a requirement. Lenders are required to disclose any insurance requirements upfront, and these would typically involve homeowners insurance or private mortgage insurance (PMI) if your down payment is less than 20%. Mortgage protection insurance, however, is optional and should be carefully considered before purchasing. The policies offered by these mailer scams are often overpriced and provide little benefit.
If you’re interested in mortgage protection insurance, consult with a trusted insurance advisor or your lender to explore legitimate options. Do not respond to unsolicited offers, especially if they pressure you into making a quick decision. Another prevalent scam targets new homeowners by offering to provide a certified copy of your property deed for a fee. Shortly after closing, you might receive a letter that looks like it’s from a government agency, warning that you need to obtain an official copy of your deed and offering to do it for you—at a cost, sometimes ranging from $80 to $100. The reality is that you do not need to pay for this service. After closing, you should receive a copy of the deed from your title company or county recorder’s office. Your lender will keep the original deed on file until your mortgage is paid in full.
To avoid falling victim to these scams, it's important to be vigilant and aware of common post-closing scams. Scrutinize any unsolicited mailers or offers you receive after closing and verify their legitimacy before taking any action. Contact your lender, county office, or a trusted professional to get accurate information. Additionally, consider opting out of pre-screened credit card and insurance offers by contacting the Federal Trade Commission.
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Loan modification scams
When consumers apply for mortgages, they give the lender approval to pull their credit report. Credit agencies are then notified, prompting some to sell applicants’ public information to other lenders. This information includes names, addresses, and phone numbers, and as a result, applicants may receive unwanted solicitations from other mortgage providers. While not all unwanted correspondence related to a home purchase is fraudulent, consumers should be cautious when assessing what services are legitimate.
Scammers may pose as mortgage loan "auditors" or "foreclosure prevention auditors", lawyers, or other experts. They offer to review mortgage documents to see if the lender complied with the law and promise that an audit can help avoid foreclosure, speed up loan modification, lower the amount owed, or cancel the loan. However, they cannot guarantee that an audit will lead to loan modification or mortgage relief. Even if legal action is successful, the lender is not obligated to modify the loan to make payments more affordable or extend the repayment period.
Scammers may also request the deed to the homeowner's property, promising to secure financing to save the home from foreclosure. However, once the deed is transferred, the scammers are in control, and the homeowner still owes payments on the mortgage loan. Scammers can then sell the home, keeping the money from the sale and the homeowner's equity. They rarely sell the home back to the original owner, and if they do, the terms are often unaffordable, leading to eviction and resale.
To avoid loan modification scams, homeowners should know that legitimate loan modifications are offered directly by lenders or government programs and never require upfront fees. Homeowners can also consult a trusted insurance advisor or their lender to explore legitimate mortgage protection insurance options. Additionally, they should be cautious of unsolicited offers, especially those pressuring quick decisions, and report suspicious companies to the Consumer Financial Protection Bureau (CFPB).
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Reverse mortgage fraud
When consumers apply for mortgages, they give the lender approval to access their credit report. Credit agencies are then notified of the applicant's interest in a mortgage loan, prompting some credit agencies to sell applicants' public information to other lenders. This information includes the applicant's name, address, and phone number, and it results in applicants receiving unwanted solicitations from other mortgage providers. While not all unwanted correspondence related to a home purchase is fraudulent, consumers should exercise caution when assessing what services are legitimate.
Reverse mortgages are a common target for fraudsters, and seniors are often the victims. Reverse mortgages allow borrowers to convert part of the equity in their homes into cash without selling their homes. While most companies promoting FHA reverse mortgages are safe, some fraudsters aim to take your money, your house, or your identity. Here are some common reverse mortgage scams:
- Inflating the value of a home: Scammers identify seniors at risk of losing their homes due to foreclosure. They work with a dishonest appraiser to inflate the home's value, obtain a reverse mortgage, and then have the senior transfer the title to them. The senior is left without a home or the funds from the reverse mortgage.
- Unnecessary reverse mortgages: In this scam, fraudsters convince senior homeowners to get a reverse mortgage and then use the proceeds to buy another property. The additional property is usually cheap and "fixed up" to look like a valuable investment. However, the new homeowner eventually realizes that the house hasn't been sufficiently repaired and will likely lose money when sold.
- Lump sum payout: Fraudsters sell seniors on taking a lump sum payout and using it to pay for unnecessary services or investments. Once the fraudsters receive the mortgage proceeds, they disappear without providing the service.
- Foreclosure relief: Scammers target seniors facing foreclosure and promise relief using a reverse mortgage. While a reverse mortgage can pay off an existing mortgage, it comes with high closing costs, fees, and ongoing expenses like property taxes, insurance, and home maintenance.
To protect yourself from reverse mortgage scams, consider signing up for reverse mortgage counseling and seeking advice from a trusted insurance advisor or your lender. Be cautious of unsolicited offers, especially those pressuring quick decisions, and be wary of anyone claiming you can own a home with no down payment.
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Predatory lending
When consumers apply for mortgages, they give the lender approval to access their credit report. Credit agencies are then notified of the applicant's interest in a mortgage loan, and some sell applicants' public information to other lenders. This information includes the consumer's name, address, phone number, and type of credit sought. As a result, applicants may experience a boost in junk mail and calls and receive unwanted solicitations from other mortgage providers. While not all unwanted correspondence related to a home purchase is fraudulent, consumers should be cautious when assessing what services are legitimate and suited to their needs.
Some companies may misrepresent themselves as mortgage providers and attempt to sell consumers unwanted products or services. For example, they may offer mortgage protection insurance, which is a legitimate product but never a requirement. Lenders must disclose any insurance requirements upfront, and these typically involve homeowners insurance or private mortgage insurance (PMI) if the down payment is less than 20%. Policies offered by these scams are often overpriced and provide little benefit.
Another prevalent scam targets new homeowners by offering to provide a certified copy of their property deed for a fee. Shortly after closing, homeowners may receive a letter that appears official, warning that they need to obtain an official copy of their deed. However, this service is provided free of charge by the title company or county recorder's office.
To avoid predatory lending, consumers should educate themselves and improve their financial literacy to spot red flags. It is important to shop around and compare offers from at least three lending institutions. Additionally, the Dodd-Frank Act of 2010 restricted many predatory practices and created the Consumer Financial Protection Bureau (CFPB) to regulate lenders and enforce consumer protection laws.
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Frequently asked questions
No, this is not normal. However, when you apply for a loan, your banker will pull a copy of your credit report, which triggers an inquiry that you are looking for new credit. Credit bureaus then sell this information to other companies, such as mortgage companies, who then send you spam.
Mortgage protection insurance is a legitimate product that covers your loan in the event of death, disability, or job loss. While it is never a requirement, lenders with insurance requirements typically involve homeowners' insurance or private mortgage insurance (PMI) if the down payment is less than 20%.
Scams often come in the form of official-looking letters or emails that appear to come from your mortgage lender or another legitimate institution. They may also call you, pretending to be your lender, and ask for personal information.
Do not respond to unsolicited offers, especially if they pressure you to make a quick decision. Consult with a trusted insurance advisor or your lender to explore legitimate options.
OptOutPrescreen.com is the official Consumer Credit Reporting Industry website to accept and process requests from consumers to opt in or out of firm offers of credit or insurance. Catalog Choice can also help consumers remove their names from mailing lists.
