Foreclosure "Rescue" Scams
There are a growing number of Foreclosure Scam Artists who are taking advantage of the fear and growing resignation that many of us have faced when losing our homes. Below you will find useful information we have collected from news media AND GOVERNMENT WEBSITES that we want you to share with friends and family.
REMEMBER! They may actually be legitimate or not doing anything illegal but if your instincts tell you something is "off"....GET MORE INFORMATION! If you have been approached by anyone or any organization that met a lot of the criteria mentioned below, please do not hesitate to let us know or contact one of the government agencies listed at the bottom.
Red Flags
If you’re looking for foreclosure prevention help, avoid any business that:
- Instructs you not to contact your lender, lawyer, or credit or housing counselor
- Collects a fee before providing you with ANY services
- Accepts payment only by cashier’s check or wire transfer
- Encourages you to lease your home so you can buy it back over time
- Tells you to make your mortgage payments directly to them, rather than your lender
- Tells you to transfer your property deed or title to them either directly or via Land Trust
- Pressures you to sign paperwork you haven’t had a chance to read thoroughly or that you
TYPES OF SCAMS:
Phony Counseling or Phantom Help
The scam artist tells you that he can negotiate a deal with your lender to save your house if you pay a fee first. You may be told not to contact your lender, lawyer, or credit counselor, and to let the scam artist handle all the details. Once you pay the fee, the scam artist takes off with your money.
Sometimes, the scam artist insists that you make all mortgage payments directly to him while he negotiates with the lender. In this instance, the scammer may collect a few months of payments before disappearing.
Bait-and-Switch
You think you’re signing documents for a new loan to make your existing mortgage current. This is a trick: you’ve signed documents that surrender the title of your house to the scam artist in exchange for a “rescue” loan.
Rent-to-Buy Scheme
You’re told to surrender the title as part of a deal that allows you to remain in your home as a renter, and to buy it back during the next few years. You may be told that surrendering the title will permit a borrower with a better credit rating to secure new financing – and prevent the loss of the home. But the terms of these deals usually are so burdensome that buying back your home becomes impossible. You lose the home, and the scam artist walks off with all or most of your home’s equity. Worse yet, when the new borrower defaults on the loan, you’re evicted.
In a variation, the scam artist raises the rent over time to the point that the former homeowner can’t afford it. After missing several rent payments, the renter – the former homeowner – is evicted, leaving the “rescuer” free to sell the house.
In a similar equity-skimming situation, the scam artist offers to find a buyer for your home, but only if you sign over the deed and move out. The scam artist promises to pay you a portion of the profit when the home sells. Once you transfer the deed, the scam artist simply rents out the home and pockets the proceeds while your lender proceeds with the foreclosure. In the end, you lose your home – and you’re still responsible for the unpaid mortgage. That’s because transferring the deed does nothing to transfer your mortgage obligation.
Fraudulent foreclosure “rescue” professionals use half truths and outright lies to sell services that promise relief and then fail to deliver.
Bankruptcy Foreclosure
The scam artist may promise to negotiate with your lender or to get refinancing on your behalf if you pay a fee up front. Instead of contacting your lender or refinancing your loan, though, the scam artist pockets the fee and files a bankruptcy case in your name – sometimes without your knowledge.
A bankruptcy filing often stops a home foreclosure, but only temporarily. What’s more, the bankruptcy process is complicated, expensive, and unforgiving. For example, if you fail to attend the first meeting with the creditors, the bankruptcy judge will dismiss the case and the foreclosure proceedings will continue.
If this happens, you could lose the money you paid to the scam artist as well as your home. Worse yet, a bankruptcy stays on your credit report for 10 years, and can make it difficult to obtain credit, buy a home, get life insurance, or sometimes get a job.
If you’re having trouble paying your mortgage or you have gotten a foreclosure notice, contact your lender immediately.
How can you know if a company is legitimate?
Legitimate companies will sit down with a homeowner and collect documentation. Their representatives will explain the offer and the process in as much detail as you need to make an informed decision. All promises and agreements will be in writing. Their representatives will not object to your desire to consult a lawyer, an accountant, credit or housing counselor, family member, friend or other expert resource. You should contact an accountant since this is a financial impact you are facing.
