Beware of Foreclosure Rescue Scams
The unfortunate environment that we are in today where much of the country is facing an avalanche of foreclosures has been a breeding ground for scam artists and less than legitimate foreclosure rescue companies. The stress and desperation of homeowners who are dealing with foreclosure makes it easy for fraudsters to claim to be able to help but unfortunately leave people worse off. They promise relief and just deliver more pain, in some cases even taking ownership of the home despite a homeowner’s legitimate intentions on avoiding foreclosure.
PreventingForeclosure.org wants homeowners who are facing foreclosure to be aware of the scenarios in which fraud may be perpetrated. Appropriate research with your state regulatory agencies is strongly recommended before engaging any business to help you prevent foreclosure.
How to Spot a Foreclosure Scam
Fraudulent foreclosure rescue firms use a variety of tactics to target distressed homeowners, from sending letters to more general approaches such as posting ads in newspapers or posters around town. It is often difficult to weed out these firms because they use the same marketing messages as legit companies. Once you are on the phone with them, their legitimate sounding promises offering relief sound like the magic pill you’ve been waiting for.
The first indication that you may be dealing with a scammer is that you are required to pay a hefty up-front fee, in the range of a thousand or several thousand dollars. This is sometimes compounded by their insistence that you pay your mortgage payments to them while they negotiate with the lender, but in reality keeping all the money before disappearing.
A second tactic is having the scam artist present you with a rescue loan or some other sort of rescue option where you are required to sign documents transferring the title of your house to them. As a common precaution with any documents that you sign, read the print carefully and don’t sign anything that you do not feel comfortable with. There are several schemes were the homeowner is asked to transfer the title, legally giving up ownership in the property, an obviously risky proposition. This type of scam can easily lend itself to a bait and switch type scenario, where certain promises are made upfront but never met after the scam artist has legal title to your home.
Another technique involves the illegitimate foreclosure rescue company filing bankruptcy for the homeowner, sometimes without their knowledge, which places a temporary freeze on the foreclosure but without any intention of following through with the bankruptcy proceedings. Bankruptcy is a very involved process that requires legal advice and can become very expensive. In most cases, bankruptcy is not the best option to prevent foreclosure, and in these cases where it is initiated by a scam artist it will most definitely end with devastating results.
The Federal Trade Commission and the Comptroller of the Currency (the Federal Administrator of National Banks) reports on these same foreclosure and mortgage modification scams that we’ve discussed.
How to Avoid Untrustworthy Companies
If you are having challenges or anticipate having trouble with your mortgage payments, contact your lender immediately. Alternatively, you can have a counselor work on your behalf to negotiate a loan modification which would offer legitimate long-term relief. We encourage you to review the Comptroller of the Currency’s publication, Ten Warning Signs of a Mortgage Modification Scam, for issues to be aware of. Ultimately, beware of unsolicited offers to help by mail or phone, and properly research any company before committing to their foreclosure prevention assistance.
Report Fraud
If you think you’ve been a victim of foreclosure fraud, contact the Federal Trade Commission or your state Attorney General.