6 mortgage-refi scams and the lessons you can learn from them (© Jupiterimages; Steve Taylor/Getty Images)

© Jupiterimages; Steve Taylor/Getty Images

Refinancing a home is a nerve-wracking, confusing process, and one that can leave even the most financially savvy borrowers vulnerable.

While new consumer regulation — part of the Dodd-Frank financial overhaul — will better protect borrowers starting in early 2014, mortgage scams are always shifting to adapt to changes in regulations and the economy. (Bing: Learn more about the Dodd–Frank Wall Street Reform and Consumer Protection Act)

"Fraud never goes away," says Ann Fulmer (no relation to the reporter), vice president of industry relations for loan-review company Interthinx in Atlanta and a long-time mortgage-fraud expert. "It just changes form."

And fraud is once again on the rise. The Interthinx National Mortgage Fraud Risk Index jumped 16% from the third to fourth quarters of 2012, the last period for which data is available.

Here are six common refinancing rip-offs, along with the lures con artists use to draw in their victims:

1. Advance fee for refinance schemes
The appeal:
"I can solve your financial problems in a way you can't." 

For newly divorced Connie Bries, who had recently seen her Dubuque, Iowa, janitorial business crumble, the phone call from "Legal Advocates" who claimed to be working for her lender, JPMorgan Chase, seemed like a blessing — a way to refinance her large mortgage so she could better afford it.

First, the firm asked for a $3,800 payment to get her into a Department of Housing and Urban Development refinancing program for single mothers. She paid a lawyer to review it, and he told her the request was legitimate. Over several months, Legal Advocates asked Bries to make her mortgage current by paying her back payments to their "resolution center" instead of Chase.

After months of waiting, she was no nearer to resolution — and a lot closer to foreclosure. When Legal Advocates asked her to submit the same payment twice because they had not received it, she canceled the first check and submitted a new one. The firm then tried to cash both, her bank told her. When she called to confront her contact at Legal Advocates, she said, the lines were disconnected.

"It has just been a living hell," Bries says of the ordeal, which cost her about $20,000 and forced her into bankruptcy.

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The scam that Bries fell for is just one of many fee-for-refinance schemes out there, Fulmer says.

Another one making the rounds with many underwater homeowners is the "forensic loan audit" or "mortgage compliance audit," in which scammers promise to review your loan documents in search of violations that will make the loan invalid and get you off the hook for paying it.

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In many of these cases, con artists do nothing for the homeowner, instead letting the home slide further into default so they can pick it up for a song in a fraudulent short sale or "flop."

The lesson: Talk to your lender, rather than outside companies. New regulations require the nation's largest banks and servicers to institute a single point of contact for delinquent borrowers. And never pay any funds upfront to a third party.

"If they get a fee upfront, they are taking advantage of you right off the bat," says Mark Lansing, a counselor with Consumer Credit Counseling of Northeast Iowa who has been working on Bries' case.

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Moreover, just because a firm has a "dot-org" Web address, or claims to be part of a government program, such as the Home Affordable Refinance Program (HARP), that doesn't mean you should trust it.

2. Land-trust scheme
The appeal:
"Give us the power to work on your behalf and renegotiate your mortgage for you."

This scam is just a variation of fee-for-refinance, but with a worse result. Con artists say they will get your loan refinanced but that they need to put the property in a trust so they have the power to deal with the bank on your behalf. Some even charge an advance fee for their time.

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Alternatively, they say they can secure better refinancing terms if your name isn't on the deed. They promise that you can remain in the home as a renter until the refinancing is finalized and the property is transferred back into your name. In the meantime, they borrow against the home or prepare to sell it and evict you.

In either case, the victim winds up handing over the title to his or her house, and the negotiating entity never has any dealings with the bank that holds the mortgage.

The lesson: Never put property in a trust or in anyone else's name. You are essentially handing them the keys for good.