How to protect your single biggest asset
Q: I have paid off the mortgage on my home. But, I am concerned. I have heard that someone can take a loan out against your home without you knowing and you could lose your home. To address my concern without knowing other options, I am keeping a minor amount due in a home equity line of credit (HELOC) so that the bank remains involved in what happens to my home.
Is this a reasonable way to protect my home? Or, is there something else I should consider? I guess what I’m asking is how do I protect my single biggest asset from a mortgage scam? Thank you for any assistance.
A: Your question is timely, as October is Cyber Security awareness month. These days, savvy consumers try to be careful about everything they do and everything they own. If you’re not, it’s easy to lose assets in the blink of an eye.
There are two sides to your question: real estate and credit. We’ll address the real estate side first.
Our legal system operates with an element of good faith. Unfortunately this element of good faith can allow bad operators to take advantage of the system. Let’s start with the process of getting a mortgage:
- You apply with a lender.
- The lender sends out an appraiser to look at the home.
- Then you sit down with the lender or at a settlement agent to sign documents.
- One of those documents then gets recorded or filed in the office that handles the filing or recording of local real estate documents.
How mortgage scams happen
In the first step, the lender will take your application. That application will need to have sufficient information about you to tie your name to the property in question. The loan officer will use that information to request a whole bunch of documents be drawn up in your name.
In the next step, the appraiser goes out to the property. The owner allows the appraiser inside to view your home. From that visit to the property, the appraiser will build his appraisal and come up with a value of the home. Then, the lender or settlement agent will require you to show up and show an identification card to prove that you are who you say you are to sign the loan documents. Finally, the document that creates a lien on your property must get recorded or filed.
In a mortgage scam, bad actors falsify documents, identification, and you
How would a fraudster infiltrate this system? Each of these steps would require a bad actor to falsify documents, provide false identification and claim that they are you for purposes of taking out the loan. And, if an appraiser showed up out of the blue to view your home, you certainly wouldn’t let them in if you had not just accepted an offer to purchase the property.
Freeze your credit with Experian, Equifax, and TransUnion
So, how do you protect yourself in this scenario? First, sign up for notifications from the various credit reporting agencies that alert you to a change in your credit history or if you have any new applications for credit. If you get an email alert for something like that, you can take steps to see who is doing what and why with your credit.
A further step you can take is to simply freeze your credit with the credit reporting bureaus. This step would prevent any potential bad actor from using your name to get credit extended to them. When a lender “pulls” your credit, they would get a notification that the credit file is locked and the lender would be unable to determine whether to give the new loan or not as they couldn’t see if the file was a good or bad file.
In addition, you can purchase credit monitoring products that will instantly notify you about changes to your credit history. You can also receive similar products for free from online companies that sell your data to creditors and other merchants. Your bank may also offer free credit monitoring if you use that credit card. Getting frequent notifications about your credit history is smart. But don’t forget the dark web. Monitoring your email address and other personal information on the dark web is equally important for preventing cyber theft. You just need to know what’s going on.
Sign up for free government alert services to protect from a mortgage scam
Back to real estate. Many government agencies that record or file real estate documents have a free service to alert you when any document is recorded against the title to your home. With this notification, you’d know that someone had filed something against the title to your home. You could view it and see if it was significant or not.
If you paid off your mortgage loan and the lender filed the release of the mortgage to your home, you’d know it was something good. If you saw a new mortgage filed against the home, you’d know it was something bad and would need to notify the lender that fraud had potentially occurred.
Vacant homes and vacant lots are targets for mortgage scams and fraud
The properties most at risk these days for fraud are vacant homes and vacant property lots. With vacant properties, a bad actor can claim to be the owner and a lender might fall for the bad actor’s scheme. When the appraiser goes out to see the lot or vacant home, the appraiser might be able to get the appraisal done without the real owner knowing that anybody had been out to see the property.
We think that if you live in your home year-round, monitor your credit history regularly, freeze your credit, and sign up for any alerts that your local recording office offers you, you’ll likely be protected.
Keeping a HELOC open isn’t going to make a difference. Bad actors can take advantage of your current lender even if you kept a small amount in the home equity line of credit (HELOC). They could do everything they would otherwise do and simply request a payoff of the HELOC at the fraudulent loan closing. The only notice you might get is that your HELOC loan has been closed, but by that time, the bad actor will be long gone.
So will more of your home equity.
Don’t get ripped off in a mortgage scam
Be vigilant with your personal finances, credit history, and your home. Watch for any recordings or filings that may be placed on the title. Remember, in most jurisdictions you can view the documents recorded against your home online. Often easily and for free.
Try it for yourself. Take a look at the most recent document filed or recorded. If you see that it shows a mortgage or lien you don’t recognize, immediately take action and start investigating.
Thanks for your question. And, make sure your passwords are safely stored and strong. They should include more than 8 characters, upper and lower case letters, numbers, and punctuation of some sort. That, in and of itself, will go a long way toward protecting your personal finances and your home.
Visit the Best Money Moves Cyber Security Resource Center for more great information about how to protect your self and your family
Read more about how to protect your family from cyber threats and mortgage scams
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©2023 by Ilyce Glink and Samuel J. Tamkin. Distributed by Tribune Content Agency. A1607