Most Common Ways To Commit Identity Theft or Fraud

Many people do not realize how easily criminals can obtain our personal data without having to break into our homes. In public places, for example, criminals may engage in "shoulder surfing" ­ watching you from a nearby location as you punch in your telephone calling card number or credit card number ­ or listen in on your conversation if you give your credit-card number over the telephone to a hotel or rental car company.

Even the area near your home or office may not be secure. Some criminals engage in "dumpster diving" ­ going through your garbage cans or a communal dumpster or trash bin -- to obtain copies of your checks, credit card or bank statements, or other records that typically bear your name, address, and even your telephone number. These types of records make it easier for criminals to get control over accounts in your name and assume your identity.

If you receive applications for "preapproved" credit cards in the mail, but discard them without tearing up the enclosed materials, criminals may retrieve them and try to activate the cards for their use without your knowledge. (Some credit card companies, when sending credit cards, have adopted security measures that allow a card recipient to activate the card only from his or her home telephone number but this is not yet a universal practice.) Also, if your mail is delivered to a place where others have ready access to it, criminals may simply intercept and redirect your mail to another location.

In recent years, the Internet has become an appealing place for criminals to obtain identifying data, such as passwords or even banking information. In their haste to explore the exciting features of the Internet, many people respond to "spam" ­ unsolicited E-mail ­ that promises them some benefit but requests identifying data, without realizing that in many cases, the requester has no intention of keeping his promise. In some cases, criminals reportedly have used computer technology to obtain large amounts of personal data.

With enough identifying information about an individual, a criminal can take over that individual's identity to conduct a wide range of crimes: for example, false applications for loans and credit cards, fraudulent withdrawals from bank accounts, fraudulent use of telephone calling cards, or obtaining other goods or privileges which the criminal might be denied if he were to use his real name. If the criminal takes steps to ensure that bills for the falsely obtained credit cards, or bank statements showing the unauthorized withdrawals, are sent to an address other than the victim's, the victim may not become aware of what is happing until the criminal has already inflicted substantial damage on the victim's assets, credit, and reputation.

Mortgage Servicing

When you apply for a home mortgage, you may think that the lender will hold and service your loan until you pay it off or you sell your house. That’s often not the case. Loans and the rights to service them are bought and sold every day.

What You Need to Know

A home may be the most expensive purchase you ever make. That’s why it’s important to know who is handling your payments and that your mortgage account is properly credited. It’s also important to know what a mortgage servicer does and what your rights are.

A mortgage servicer is responsible for collecting your monthly loan payments and crediting your account. A servicer also handles your escrow account, if you have one.

An escrow account is a fund that your servicer holds. You pay money into this fund to cover charges like property taxes and homeowners insurance. The escrow payments typically are included as part of your monthly mortgage payment. The servicer pays your tax bill and your insurance bills as they become due.

If your mortgage servicer administers an escrow account for you, the servicer is generally required to make escrow payments for taxes, insurance, and any other charges on time. Within 45 days of establishing the account, the servicer must give you a statement that clearly itemizes the estimated taxes, insurance premiums, and other anticipated charges to be paid over the next 12 months, and the expected dates and amounts of those payments.

The mortgage servicer has to give you a statement every year that details the activity of your escrow account. This statement shows your account balance and reflects payments for your property taxes, homeowners insurance, or other charges. There is no charge for this statement.

Reverse Mortgages

If you’re 62 or older and looking for money to finance a home improvement, pay off your current mortgage, supplement your retirement income, or pay for healthcare expenses, you may be considering a reverse mortgage. It’s a product that allows you to convert part of the equity in your home into cash without having to sell your home or take on additional monthly bills.

In a “regular” mortgage, you make monthly payments to the lender. In a “reverse” mortgage, you receive money from the lender and generally don’t have to pay it back for as long as you live in your home. Instead, the loan is repaid when you die, sell your home, or when your home is no longer your principal residence. The proceeds of a reverse mortgage generally are tax-free, and many reverse mortgages have no income restrictions.

If you’re considering a reverse mortgage, be aware that:

Lenders generally charge origination fees and other closing costs for a reverse mortgage. Lenders also may charge servicing fees during the term of the mortgage. The lender usually sets these fees and costs.

The amount you owe on a reverse mortgage gets bigger over time. Interest is charged on the outstanding balance and added to the amount you owe each month. That means your total debt increases as the loan funds are advanced to you and interest on the loan accrues.

Most reverse mortgages have variable rates that are tied to a financial index and are likely to change according to market conditions. Some reverse mortgages have fixed rates.

Reverse mortgages can use up all or some of the equity in your home, leaving fewer assets for you and your heirs. Most reverse mortgages have a “nonrecourse” clause, which prevents either you or your estate from owing more than the value of your home when the loan is repaid.

Because you retain title to your home, you are responsible for paying property taxes, insurance, utilities, fuel, maintenance, and other expenses. So if you don’t pay these expenses, you risk the loan becoming due and payable.

Interest on reverse mortgages is not deductible on income tax returns until the loan is paid off in part or whole.