Hundreds of thousands of people in the United States are losing their homes to foreclosure. Whenever anything happens in large numbers entrepreneurs and business people will find a way to offer a service and make a profit. Some are reputable business people with good intentions; they offer a valid service and deliver what they promise. Others are scammers, preying on the weak and helpless, offering them a solution that sounds “too good to be true.” Remember, as a rule, if it sounds too good to be true, it usually is!
Increasing Numbers of Foreclosures Leads to More Foreclosure Rescue Scams!
Certain lending practices, including the adjustable rate mortgage, combined with our current market slump and increased unemployment has contributed to the increased number of people losing their homes to foreclosure. Sadly, thousands more will face foreclosure in the next year. This is a great opportunity for the foreclosure rescue scammers. There are lots of potential victims and they are desperate for help. They are easy to find because the notice of default is public record.
What Types of Scams are being used?
One popular scam is known as the sale-leaseback scam. This one worked really well when homes were appreciating in value or if the homeowner had a lot of equity in the home. The scammer agrees to buy the home, pay off the mortgage and then lease it back to the homeowner until they can buy it back at a later date. The contract is very confusing and the homeowner doesn’t realize how much their payments are going to increase over time, making it impossible for them to make their lease payments. Perhaps the contract will provide for very difficult buy-back terms, making it impossible for the occupants to regain ownership. The scammer’s plan is to prey on the distressed homeowner’s savings and their desire to keep their home. Once all of their financial resources have been exhausted, they are ultimately evicted from their home. During this process, the scammer counts on the home appreciating in value so he can market and sell it for much more than what the previous owner would have paid him for it.
The sale-leaseback scam has been modified to fit today’s declining market. The scammer agrees to help by bringing the mortgage payments current and making all future payments while the homeowner pays an affordable amount of rent to remain in their home. Again, the contract is very confusing and “scammer-friendly” with hidden fees and terms that are impossible for the homeowner to meet. The scammer might show some good faith in bringing the payments current, but eventually, they will stop paying the mortgage, taxes and insurance, allowing the foreclosure to proceed, while they continue taking rent payments from the owners. They never really assumed responsibility for the mortgage payments; therefore, the homeowners who are paying rent are still on the hook to pay the mortgage.
Collecting Big Fees for Little Service
Some foreclosure scammers will claim to be foreclosure specialists who work with lenders to modify the terms of a mortgage and stop the foreclosure. They tell the homeowner to stop making payments immediately, so they will be able to pay the scammer a fee. The scammer might tell them not to bother opening any more mail from the mortgage company; just give them the mail and they will work on getting the matter resolved.
Sometimes, a scammer will collect a large fee and perform some service, like mortgage modification negotiation, which is something the average homeowner doesn’t realize that they can do themselves.
In any case, the homeowner is under the impression that the scammer is providing a service and handling the situation. By the time the homeowner realizes that he has been scammed, it’s too late; the foreclosure process has moved forward and the redemption period is up.
Stealing Title to the Home
In some rescue scams the homeowner does not realize they are signing ownership of their home to the scammer. The scammer explains a program that sounds good to the desperate homeowner and he just signs on all the lines, as indicated by the scammer. Some scammers have the nerve to get a legitimate contract signed, and then later, they forge a deed and another set of documents, thus, stealing title to the home. By the time the homeowner realizes that they have been duped, the home has been sold to another party!
How to Protect Yourself from Foreclosure Scams
The first thing to know is what the foreclosure scammer looks like. The scammer uses many methods to gain the trust of the distressed homeowner. Here are some examples:
Ø They contact you by phone, mail or door knocking.
Ø They are slick, fast-talkers who prey on your desperation. They know what you want to hear and that is what they tell you, using words like “quick and easy,” “stop foreclosure now,” “save your home,” “instant debt-relief,” and so on.
Ø They offer guarantees and customer testimonials
Ø They have something in common with you; ethnic background, senior citizens, religious beliefs, schools they attended, or whatever they need to gain your trust
Ø They tell you to cease all contact with your lender and pass on mail or phone messages to them to handle.
Legitimate foreclosure consultants rarely approach you; they advertise like any other business and you must approach them for help. There is nothing quick and easy about the foreclosure process. There are no guarantees of a lender’s cooperation and anyone can make up customer testimonials. It is easy to find out church you attend, what language you speak, the clubs you belong to, etc…then pretend to have this in common with you. A foreclosure specialist will never tell you to stop communicating with your lender; this is the biggest mistake one can make and a sure guarantee that the foreclosure process will move ahead at full speed.
Steps to take to Help Yourself
Now that you know how to spot a foreclosure scammer, you can take the necessary steps to protect yourself.
Keep in touch with your lender. Contact your lender immediately when you anticipate financial problems. You might qualify for a special refinance program or you can ask for a mortgage modification or enter into a forbearance agreement.
Seek help from a legitimate foreclosure consultant who can explain the foreclosure time line and instruct you as to how to proceed. Learn all you can about the foreclosure process in your state; understand the deadlines and respond to all documents you receive from your lender. An honest foreclosure specialist will be able to explain the meaning of letters and documents you receive if you do not understand them. Know where you’re at in the foreclosure process and when you are going to lose title to your home.
Check with the state to learn about the guidelines that a foreclosure consultant must follow. Some states require a consultant to give you a certain time period to cancel a contract or agreement that you enter with them. Find out what agencies you need to check with to determine the credibility and honesty of a foreclosure consultant. The internet is a great source for information; Google search the consultant you’re considering doing business with. If there have been complaints, you’re sure to find a press release or other documented information.
Never make a verbal agreement, get everything in writing, and be sure to read and understand everything clearly before signing any document. Do not sign any document that is blank or not completely filled out. Lastly, avoid the consultant who asks you to sign a deed, giving them ownership of your home. This is one of the biggest red flags there is indicating one is a foreclosure rescue scammer.
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