For those threatened by foreclosure, they are vulnerable to foreclosure assistance companies who claim they can help them save their homes. Fraudulent foreclosure ‘rescue’ professionals tell their clients half truths and blatant lies to sell services that supposedly bring relief, but fail to deliver. Their goal is to make quick profit from fees or mortgage payments they collect from homeowners which, they do not pass on to lenders. There are times they assume ownership of these homes by deceiving the homeowners. By the time the homeowner realizes what is going on, it will be too late to save the home. They take the property, and some other times clean out the equity. This leads to home loss despite one’s best efforts.
The Federal Trade Commission (FTC), which is the United States of America’s consumer protection agency, has pointed out ways to recognize scams. Even if a homeowner facing foreclosure has started working with someone or a company. Or even the homeowner who is threatened by other bodies that can foreclose on your home like the IRS, Homeowners’ Associations, to name a few. There are legal options for people in these situations to save their homes.
THE SCAMS
Mortgage companies use different tactics to find homeowners in distress. Some of them go through public notices in newspapers and on the Internet or public files at local government offices. They send out letters to the homeowners. Some others take a broader approach by placing ads online, television, newspaper, posters on telephone poles, median strips, bus stops, or flyers or business cards at the door.
These scan artists use very simple and straight forward messages like these:
“Stop foreclosure now!”
“We guarantee to stop your foreclosure.”
“Keep your home. We know your home is scheduled to be sold. No problem!”
“We can save your home. Guaranteed. Free consultation.”
“We stop foreclosures every day. Our team of professionals can stop yours this week!”
The moment the homeowner’s attention is gotten, various tactics are used to get their money. Here are some of the ways:
Phony Counseling or Phantom Help
These scam artists tell homeowners that they can negotiate deals with the lenders to save their homes if a fee is paid first. Some will tell their clients not to contact their lenders, lawyers, credit counselors. They ask them to let them, the scam artists handle everything. Once the fee is paid, the scammer takes off with the money.
Other times, the scammer convinces the homeowner to make all mortgage payments to them while they negotiate with the lenders. The scam artists will collect some months’ payments and disappear.
Bait and Switch
There are times when homeowners think they are signing documents for a new loan to keep the existing mortgage current, not knowing they are being tricked. What they do not know is that they have signed documents that surrender the title of the house to the scammers in exchange for a ‘rescue’ loan.
Rent-to-Buy Scheme
Homeowners are asked to surrender the title of their homes as part of a deal that allows them to stay in their homes as renters, and buy back in a few years. They may also be told that surrendering the title will let borrowers with better credit rating to receive new financing, which will prevent the loss of their homes. Usually, the terms of these deals are too much that buying back these homes are impossible. The home is lost, and the scammer walks off with all or most of the equity. The worst of all, when the new borrower fails on the loan, the actual homeowner is evicted.
In some other ways, the scammer raises the rent over time to a point that the original homeowner is unable to make payments. After many payments are missed, the renter, who is the former homeowner, is evicted, leaving the ‘rescuer’ free to sell the house.
In other equity-skimming situations, the scammer offers to find a buyer for the house, only if the homeowner signs over the deed and moves out. The scammer may also promise to pay the homeowner a portion of the profit when the home is sold. The moment the deed is transferred, the scammer rents out the house and keeps the proceeds while the lender continues with the foreclosure. Eventually, the home is lost, and the homeowner is still responsible for the unpaid mortgage. Transferring the deed does not transfer the mortgage obligation.
Bankruptcy Foreclosure
The scammer may promise to negotiate with a homeowner’s lender or get refinancing on their behalf if a fee is paid immediately. Instead of contacting the lender or refinancing the loan, the scammer keeps the fee and files for bankruptcy in the homeowner’s name. Sometimes, this is done without their knowledge.
Very often, bankruptcy stops a foreclosure, but only temporarily. The bankruptcy step is complicated, not to talk of expensive and unforgiving. If one fails to attend the first meeting with creditors, the bankruptcy judge will dismiss the case and the foreclosure proceedings will continue.
When this happens, the person could lose the money paid to the scammer as well as the house. Worse of all, a bankruptcy stays on the person’s credit report for 10 years and can make it hard to obtain credit, buy a home, get life insurance, sometimes get a job.
Where Help Can Be Found
If you are finding it difficult to make your mortgage payment or if you have received a foreclosure notice, contact your lender immediately. You may be able to negotiate a new repayment schedule. Bear in mind that lenders normally do not want to foreclose; it costs them lots of money.
There are other foreclosure options that include reinstatement and forbearance.
You can also contact a credit counselor through the Homeownership Preservation Foundation (HPF). It is a non-profit organization that operates the national 24/7 toll-free hotline (1-888-995-HOPE) with free, bilingual, personalized assistance to help at-risk homeowners avoid foreclosure.
Here Are Some RED FLAGS
If you are looking for home loss prevention help, avoid businesses or people that:
1. Guarantee to stop foreclosure process, no matter what the circumstances are
2. Instruct you not to contact your lender, lawyer, or credit counselor
3. Collect fees before providing you with services
4. Accept payment only by cashier’s check or wire transfer
5. Encourage you to lease your home so you can buy it back over time
6. Tell you to make your mortgage payments directly to them, instead of to your lender
7. Tell you to transfer your house deed or title to them
8. Offer to buy your house for cash at a fixed price that is not set by the housing market at the time of sale
9. Offer to fill out paperwork for you
10. Pressures you to sign paperwork you have not had a chance to read thoroughly or that you do not understand.
Where to REPORT FRAUD
If you have been a victim of foreclosure fraud, contact:
- Federal Trade Commission
- Your state Attorney General
- Your local Better Business Bureau
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