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Loan Flipping Scams May Result in Losing Your Home

Loan flipping scams target the elderly and first-time homebuyers. Learn the red flags of this scam to protect yourself from financial loss or foreclosure.


Nicolle Monico
Updated 26 January 2022
Loan Flipping Scams May Result in Losing Your Home

United States Scam & Fraud Statistics 2020


$3.3 billion total fraud losses
4.7 million fraud reports

1.4 million reports of identity theft

Source: 2019-20 Consumer Sentinel Report

Sections on this page
  1. How Loan Flipping Scams Work 
  2. Red Flags of Loan Flipping Scams 
  3. How to Beat Loan Flipping Scams 
  4. People Most At-Risk of Loan Flipping Scams
  5. Have you Fallen for a Loan Flipping Scam? 

Mortgage loan fraud for profit involves those within the industry such as mortgage brokers, real estate agents, or property appraisers deceiving borrowers for money. Within this category are loan flipping scams in which lenders collect transaction fees and closing costs for their own financial gain.

With real estate fraud on the rise, it's a good idea to know what red flags to look for so you can easily avoid this scam and protect your money and home.

How Loan Flipping Scams Work 

Loan flipping occurs when a loan officer (a scammer) convinces a homeowner to repeatedly refinance their mortgage while borrowing more money each time. The scammer then charges additional fees and points for each transaction, leaving the homeowner with higher loan payments, longer loan terms, and additional debt. Here’s how it works.

You’re Contacted About Your Home Loan

You’re contacted by a fake loan officer about refinancing your home even though you never requested help with a new loan. Often, they'll pretend they either work for your mortgage lender or bank to gain your trust; but this isn't true.

Once you agree to speak with them, they'll convince you that it’s a good idea to refinance your home—regardless of whether you recently refinanced.

You Get Locked Into Longer Loan Terms

After agreeing to refinance, they’ll lock you into a new long-term, high-cost loan. To complete the agreement, they'll charge high fees and points for that you are required to pay to get your refinanced loan.

During the course of your loan, you’ll be asked a number of times to repeat these steps to, oftentimes you'll also be increasing your loan amount and interest rate.

You Can No Longer Make Payments

After years of refinancing, you’re now left with higher loan payments that you can’t afford for more longer than you had originally planned for due to longer loan terms. The scammer now has your hard-earned money from continuous transaction fees and closing costs. With enough delinquency, your home may also now be in jeopardy of foreclosure.

Foreclosure Loan Modification Scam

Another version of this scam involves fake lenders (scammers) assisting homeowners in refinancing their home due to their delinquent account. Because these homeowners are on the verge of losing their home, the scammer will trick them into paying large fees upfront to “save” their property. However, the scammer will either choose unfavorable terms or won’t renegotiate their loan at all, resulting in homeowners losing their homes.

Red Flags of Loan Flipping Scams 

When dealing with mortgage loan fraud, there are a number red flags to be aware of to avoid loan flipping scams. These include: 

  • Being contacted about refinancing your home when you didn’t request this type of information
  • A loan officer wanting you to refinance even though you recently refinanced
  • Pushy loan officers rushing you to sign documents without you reading them
  • Refusing to meet in-person 
  • Asking you to pay upfront fees to receive their services
  • Asking you to sign papers that you don’t understand
  • Changing who you’re making your loan payments to instead of to your mortgage lender
  • Loan officers not providing loan estimates and closing disclosures, or not listing all fees and third-party costs

How to Beat Loan Flipping Scams 

When it comes to your mortgage, it’s always smart to talk to various lenders and get advice from trusted professionals as well as knowledgeable friends and family.

Other ways to beat loan flipping scams include: 

Verifying The Loan Officer’s Information

It’s always a good idea to verify who you’re working with. Scammers will often pretend to be working with your mortgage servicer, the government, or your lender.

Make sure you ask for their license number and contact the agency or company directly they claim to work for to ensure that they are a licensed broker. You can also look this up yourself online via the Nationwide Mortgage Licensing System & Registry’s (NMLS) database.

Verifying The Mortgage Lender or Bank

Along with verifying your loan officer, be sure you’re only working with well-known mortgage lenders and banks. It's good practice to only work with HUD-certified credit counseling agency when considering refinancing your loan.

If you’re unsure whether it’s a credible institution, check online or call the bank or lender’s number directly. Note: Don’t use any number provided by the loan officer; look up the contact information for the bank or lender online.

Requesting to Meet Them In-Person

Make sure that you can meet with your loan officer in person. Sometimes scammers will give you various reasons as to why they can’t meet with you—this is often a red flag. Legitimate loan officers will have no problem meeting with you.

Refusing to Refinance Often

Typically, these types of scammers will want you to refinance your mortgage repeatedly over the course of your loan terms. If you recently refinanced your home, this may not be a good time to do so; though this may not always be the case.

If you’re unsure of whether it’s in your best interest or not, call around to credible mortgage lenders to get second or third opinions on your situation.

Asking for Your Loan Disclosures

Make sure you receive your loan disclosures and question anything that doesn’t make sense to you, including fees, penalties, and charges. Before signing, make sure you understand the new terms and fees and take your time reading through all the documents. If you don't, have a trusted friend, family member, or advisor help you read through them.

People Most At-Risk of Loan Flipping Scams

  • Elderly homeowners
  • First-time home buyers
  • Homeowners facing foreclosure
  • Homeowners struggling with job loss
  • Homeowners with poor credit
  • Homeowners with overdue mortgage bills

Have you Fallen for a Loan Flipping Scam? 

If you think you’ve fallen for a loan flipping scam, you should report it immediately to:

To file a complaint against a licensed mortgage loan broker, visit your state’s Department of Financial Protection and Innovation (DFPI) for information on reporting mortgage-related issues.

Protect Your Identity

Finally, if you feel your identity is in jeopardy, report the incident on IdentityTheft.gov, the government’s online portal for reporting and recovering from these types of scams.

You can also take further steps to protect your compromise information by:

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