My Mom Got Scammed Trying to Refinance Her Mortgage

There’s not much worse than a scammer. Except maybe one that takes advantage of older people who are already having financial difficulty. As a warning to others, Samantha Savory was kind enough to share her Mom’s story about being defrauded when trying to refinance her house. Here’s her story…

Mortgage Refinance Scams

Don't fall for this refinance scam.

I remember hearing ridiculous stories from friends and co-workers about people who they knew losing thousands of dollars to credit card or mortgage scams.

I always thought to myself ‘What a bunch of dummies!’

Right away I was overly judgmental and never fully understood how someone could be so stupid to fork over money to a stranger.

That was, until it happened to my mother.

My Mom’s House and Mortgage

My mom has lived in the same home in South Florida for nearly 25 years. She has always paid her mortgage on time and never asked for a handout. Five years ago, when the economy was thriving and no one, other than perhaps lending and banking insiders, knew the housing bubble was about to burst my mom refinanced her mortgage to get a temporary lower interest rate.

In laymen’s terms, the refinance offered a low fixed interest rate for the first 5 years and the remaining 25 years of interest would be at an adjustable rate and could go as high as 14.5%. Anyone who knows anything about mortgages should know that an interest rate in this market that is above 7% is a complete rip off.

Unknowingly she signed a contract that stated if paid to as agreed would force her to pay over $500,000 in interest for a $300,000 loan. In 2005, my mother’s home was estimated to be worth nearly $500,000, but in today’s market, it isn’t even worth $300,000.

A Reason to Think Twice About Adjustable Rate Mortgages

One year before my mom’s mortgage payment would jump from $1,500 to $2,300, she went to Bank of America and tried to refinance. They wouldn’t talk to her because technically she and her husband made enough money to pay the monthly mortgage amount, and the bank would not reap any benefits from trying to help my mom. Also, a person needs an almost perfect credit score to be able to refinance, which my mom does not have.

Enter the Low Life Scammers

Two weeks went by and my mother started getting calls from telemarketers claiming they work at mortgage refinance companies and that they could help her. For some strange reason, my mom ended up believing a person who claimed he worked at “The Hardship Center” which according to the email signature was a debt settlement association approved company.

Quick side note: The problem is no matter how many degrees my mom has and how educated I assumed she was, she did not know that debt settlement firms are usually scams and are BAD. She also did not know that getting a mortgage modification or refinance has absolutely NOTHING to do with debt settlement. People who don’t work in the debt or finance arena don’t understand the differences between legitimate companies that help people save their homes or pay off debt and scam artists.

Back to the story — the telemarketer from “The Hardship Center” told my mother that in order to get her home refinanced she needed to pay an upfront fee of $2,500.

You probably already guessed that my mother transferred funds from an online account to this guy. Ironically she transferred the money from her Bank of America checking account, the same bank that rejected her from a legitimate refinance.

Uncovering the Scam

Nearly 3 weeks later, the salesperson’s email stopped working, the “Hardship Center” website URL was gone and no one was answering the phone. My mom then realized that someone took advantage of her and scammed her for thousands of dollars.

My mother was so desperate not to lose her home or pay an outrageous monthly mortgage payment; she thought there was a quick fix and fell for a slimy salesman’s tricks. Shortly after, my mom did some investigating with her best friend, known as Google, and read on the Better Business Bureau’s site that there were complaints about this company scamming other homeowners.

Think you’ve been scammed? Be sure to check out these 6 essential resources for fighting back.

Needless to say, my mom has learned many lessons. Two of the biggest:

  1. Don’t ever refinance or buy a piece of property without a lawyer present to read the contract and the fine print.
  2. Don’t trust any company that wants you to give them thousands of dollars for a quick fix because 99% of the time, it’s a rip off.

Have you had a similar situation? What are some of your tips for avoiding scams like this?

Samantha Savory is a regular blogger for MissMoneyBee.com whose mission is to provide expert money management advice, promote financial literacy, and keep readers in the know about the best ways to save and spend their money.

Image by OlgerFallasPainting

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Last Edited: December 19, 2011 @ 11:40 am
13 comments
Al
Al

Since the article contains a link to the BBB I think it's worth mentioning that their focus is on serving their members (businesses who pay membership dues) and NOT consumers or the general public. "No complaints on file" at the BBB could mean that no one has previously complained about a particular lender (or any other business) or it could just mean that that business is paid up to date on their BBB membership dues. 

aleczac
aleczac

The bad credit will not stop you necessarily obtaining approved for a mortgage deed of refinancing, but it will affect the interest rate which you pay. 

Bill
Bill

This story just doesn't add up. The scammers in the second half are obviously dirtbags who deserve to be jailed. The first half about her original refinancing leaves out far too many important details.

First and most importantly if the mother was living in the same house for 25 years making mortgage payments she didn't refinance for $300,000 in 2005 to "get a temporary lower interest rate". She refinanced to take cash out of the home. People who receive hundred thousand dollar checks don't get sympathy for taking out expensive loans. If you have been a homeowner for 25 years and get into trouble making your mortgage payments because you did one or more equity takeouts along the way it's your own fault not the bank's.

Second, I can't think of a 5/1 product that existed in 2005 that would have a monthly payment resetting higher in 2010. Virtually all adjustable rate mortages are indexed to a handful of short term indices which have fallen to historically low levels in recent years. The overwhelming majority of mortgage payments reset LOWER on Arms because of this. The only product I can think of that could explain this payment shock would be a hybrid option arm which was fairly rare in 2005, it's brother the regular option arm was still king at that time.

Third any explanation that includes "Unknowingly she signed a contract..." loses all credibility. You sign it you owe it, if you don't know enough to understand the loan terms you need to know enough to ask for advice from someone who does.

JasonCabler
JasonCabler

BOOM!!! Its time people started taking responsibility for their financial actions. It's become too easy to blame the banks. They couldn't have done anything without Joe and Suzy Main Street who took out the loans.

miss_savory
miss_savory

My mom would never walk away from her home...she's entirely too stubborn. I tell her all the time to do so. Plus she uses the same excuse all older pple seem to use: "I'm too old to go into foreclosure, ruin my credit and start over...blah blah blah..." She is 60 so I GUESS she has a point. And I won't bother responding to the other ridiculous comments on this page. Its cute how some people assume they know everything and make judgements.

MJTM
MJTM

Why doesn't she walk? Isn't Florida a non-recourse state?

DrCabler
DrCabler

Doesn't matter how many degrees you have, you can still get scammed. But the problem here is not just the scammer.

It began with the bad decision to refi with an adjustable rate mortgage. Anyone who does any research on that kind of loan should quickly realize that is will probably end up badly with an increased payment.

Once she realized the problem and tried to refinance at BOA, there was no way BOA was going to refi that sweet deal. It would have been better to go to another bank, then another and another until she found one to work with her.

Then once she got desperate, she made the mistake of trusting someone that cold called her on the phone. When you get desperate you do stupid things. Your mom probably knew that she shouldn't trust a cold caller, but she let them convince her because she was desperate.

One mistake compounded upon another until she allowed herself to be taken advantage of.

This is a great example of what can happen when you don't do your research and and have no clue of what you're getting yourself into. It happens to way too many people

miss_savory
miss_savory

Scott, you are not understanding the quote. BOA would not refinance b/c my mom was paying a 7% adjustable interest rate (could go as high as 14%)....she wanted to refinance to a lower -- something like 5.25% fixed rate...but they would not do that b/c the bank obviously makes more money charging 7%+. Nothing incorrect or misleading. Banks care about profit, which is all fine. But when her home value has last over $200K and her mortgage payment goes up $800+, there is an unethical issue going on.

Kacie -- It was 30 yr mortgage, 1st 5 yrs was a fixed rate, remaining 25 yrs was adjustable. She signed this before 2005 when the house was worth $500K (now worth less than $300K) and the bankers told her she could just refinance in another 5 years to get an even lower rate.

-- Samantha

Scott
Scott

@miss_savory Thanks. I didn't realize the her original mortgage was with BOA as well.

DrCabler
DrCabler

@miss_savory sorry, there was not an ethical issue going on there. That's what she signed up for and it didn't work out. People have to realize that sometimes real estate can lose value. She should have known better than to trust everything that the salesperson told her and realize that just because they say you can refi in 5 years doesn't mean you actually can.

Kacie
Kacie

Question -- Did she have a mortgage for the first 25 years? Was she only 5 years from paying it off, and then refinanced for another 30? I don't understand that detail.

Dan
Dan

Yeah, I think we are missing some details, and his Mom isn't as bright as he would like to believe.

scott
scott

"she went to Bank of America and tried to refinance. They wouldn’t talk to her because technically she and her husband made enough money to pay the monthly mortgage amount, and the bank would not reap any benefits from trying to help my mom."

Wow, is this incredibly incorrect and misleading! Of course banks want customers to make enough in order to repay their loans, if not, they wouldn't earn any interest income on the loans that they issued! Stop blaming the wrong person for something that the scammer did and that your mom did wrong.