In 2008, mortgage fraud cost homeowners approximately $2.5 billion. According to the IRS, in 2008, there were 349 real estate fraud cases investigated and 136 convictions. There have been 2,268,108 foreclosures this year and counting. Over 360,000 foreclosures occurred in the month of July. Approximately 618,217 people have filed for bankruptcy so far this year.
Lawmakers are trying to change the mortgage buying process to make it easier for homebuyers to understand the process and reduce fraud and corruption in the industry. Well, it's about time! The process would be revamped by the proposed new consumer protection agency called Consumer Financial Protection Agency.
Some of the things that would be eliminated are the use of fine print and the thousands of papers to read and sign. This would provide complete visibility for homebuyers into the mortgage process and ensure that homeowners purchase homes with no hidden fees, gimmicks or mortgages that they can't afford. Other things that would be eliminated under the revamped process are: complex mortgages that make mortgage companies the most money would be offered last, simpler less expensive mortgage would be offered to potential homebuyers first; prepayment penalties would be banned or restricted; mortgage brokers will be held accountable for accurately determining if a homeowner can afford to purchase a home; and better disclosures which includes identification of all fees associated with a mortgage loan.
This all sounds good but there is always a catch. Home buyers might have to pay more for their mortgage to ensure that mortgage companies don't lose any money by changing their processes. Previous proposals by some members of Congress for one-page mortgage forms have not been successful. If you would like to see a change to the mortgage process contact your state congressman and depend easier, fairer mortgage loan processes.
Here are 5 ways to protect yourself from mortgage fraud:
1. Go with your gut. Go with your gut instinct, if you feel like the deal is too good to be true or if you feel like something is not right with the loan, don't sign it.
2. Ask questions. Ask lots of questions; have everything explained to you prior or during settlement.
3. You can change your mind. If you sign the settlement papers and feel like you made a bad decision, you have 3 days to notify the mortgage company that you wish to cancel the loan.
4. Do research. Do lots of research on the home buying process before you go to settlement so that you are an educated homebuyer which also minimizes chances of fraud during your settlement. Visit the hud.gov website for great tips on the home buying process.
5. Take your time. This is one of the most important decisions of your life. Don't rush through the process. Don't let your emotions cause you to make a bad decision. Talk to family or friends who have bought a home and get advice which will help you learn from them their mistakes.
Harrine Freeman is owner of H.E. Freeman Enterprises, a speaker, personal finance expert and the author of, “How to Get Out of Debt: Get an “A” Credit Rating for Free Using the System I%u2019ve Used Successfully with Thousands of Clients.
H.E. Freeman Enterprises is a personal finance services company that helps clients restore their credit and learn how to manage their finances. She has appeared in Forbes, Market Watch, Redbook, Essence, and Black Enterprise Magazines, as well as NBC, the Prince Georges Gazette, Bankrate.com, Yahoo.com and Credit Cards.com.
She is a member of Credit Professionals International, the American Association of Daily Money Managers, SPAWN, Toastmasters, AAUW, National Association of Women Writers, and the Women Network.
For more information on how to get out of debt or to buy her book please visit http://www.hefreemanenterprises.com She can be reached via email at hfreeman@hefreemanenterprises.com.
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