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Beware of Refinancing Scams

Some homeowners look to refinancing to get out of adjustable-rate mortgages or lower the rate on their fixed-rate mortgages to help ease financial pressures. In August 2010, applications for mortgage refinancing hit a 15-month high as interest rates were at near historic lows.

Some homeowners have become the target of fraudulent refinancing offers. Such fraudulent refinancing offers may begin with a call from an “under-writer,” who may refer to the homeowner’s good payment record, good credit, or current mortgage rate to confuse the homeowner into believing that the call is from the homeowner’s current mortgage lender. The caller may offer the homeowner a refinancing offer that is hard to pass up, such as a lower interest rate, no closing costs, guaranteed approval, no required appraisal, and a speedy closing. Since people may believe that their current mortgage lender is offering the deal, they do not question the offer. After the caller convinces the homeowner to refinance, the homeowner is asked to pay a fee to proceed with the refinancing, which can be as high as two mortgage payments. Once the homeowner provides payment for the refinancing, nothing happens on the homeowner’s refinancing file and the homeowner is out thousands of dollars while never closing on the offered refinance. These types of scams are hard to detect because the refinancing process can be confusing, and terms, fees and conditions of a refinance can vary from person to person.

To avoid refinancing traps, the Attorney General’s Office offers the following tips:

If you believe you are the victim of a refinancing scam, file a complaint:

Office of Minnesota Attorney General Lori Swanson
1400 Bremer Tower
445 Minnesota Street
St. Paul, MN 55101
(651) 296-3353
TTY: (651) 297-7206
TTY: 1-800-366-4812

Minnesota Department of Commerce
Market Assurance Division
85 East Seventh Place, Suite 500
Saint Paul, MN 55101
651-539-1500  (External Link)

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