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Avoid Scams and Fraud

 

Homeowners facing foreclosure have to worry about being taken advantage of not only by those who are purporting to offer relief assistance, but also by the banks who made and hold their home loan.

Bank Fraud and Abuse

During the real estate boom, banks and mortgage lenders were in such a rush to produce more loans that they often overlooked legal requirements and standards for making a home loan or a mortgage. Additionally, after the loan was made, so many of these mortgages were then consequently sold, resold and placed in the hands of Wall Street going through several different hands in the process that the original loan paperwork was either lost or misplaced. If a bank threatening a homeowner with foreclosure can not provide a court with the legally required original loan paperwork then they do not have the legal right to foreclose.

How to Fight Bank Abuse

  1. If any bank wrongdoing exists with the making of the loan, it can be revealed by having a loan audit performed. A loan audit is a meticulous review of the loan paperwork and the loan making process to confirm that all applicable laws and regulations were followed. Violations of these laws can provide leverage in negotiations with a bank to save your home, or even provide a basis for the cancellation of the loan and consequently the foreclosure itself.
  2. If a bank has incorrectly or aggressively pursued a foreclosure, you have legal rights protecting you as a consumer and you may be able to bring suit against the bank for violations of the law. Additionally, there are several government regulatory agencies that should like to hear about the bank’s malpractice, specially since there have been several recent reports about banks foreclosing on homes without any proper review.

Foreclosure Rescue Scams

Homeowners experiencing financial distress are particularly susceptible to foreclosure rescue scams.  Typically the scams are either to bilk the homeowner of their cash, of the equity accumulated in the home, or of the home itself by acquiring title to the property. It is important to recognize the warning signs to these scams to avoid any additional complications to your foreclosure.

Types of Foreclosure Rescue Scams

  1. Bogus Help: These types of scams typically begin with a “professional” who charges a large fee upfront to assist with the preparation and negotiation of a loan workout. The result is that the scammer gets the homeowner’s money and never delivers any significant help, leaving the homeowner with little time to prevent a foreclosure.
  2. Fraudulent Bailouts: These scams are also known as “sale/leasebacks” or “lease/buybacks.” The homeowner gives up title to their home and is then promised to be able to lease the home back from the rescuer while the homeowner gets back on their feet. The rescuer further agrees to sell the home back to the original homeowner after a period of a few months or years on predetermined terms. The terms end up being difficult to meet and the “rescuer” (scammer) ends up with permanent possession of the home.
  3. Bait and Switch: These foreclosure rescue scams occur when homeowners are fooled into signing paperwork they believe to be for a refinance or for a loan modification when they are really signing away ownership to the home.

How You Become a Target

Homeowners facing foreclosure in California are easy targets to scammers and unscrupulous foreclosure rescue firms because the state makes the notices, the Notice of Default and the Notice of Sale, public information. So when a homeowner receives mail or a phone call “guaranteeing” that their home can be saved it is usually because they have been targeted using this easily acquired information.

There are legitimate reasons for making this information public, but if you are not careful you can become a victim.

Foreclosure Protection Tips to Avoid Scams

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, but before you entrust your future with them, keep these things in mind:

  1. Do not panic. Get educated on what your options are and what the foreclosure process entails in the state of California. The more you know, the better decisions that you will make.
  2. Do not ignore letters from your bank, lender or loan servicer.
  3. When asked to sign a contract or paperwork:
    1. Do have an attorney review the paperwork.
    2. Do not sign anything under pressure.
    3. Do not sign anything with blank spaces or blank lines.
  4. Do not transfer title or ownership of your property without the advice of your attorney.
  5. Do not make your mortgage payment to anyone other than your mortgage company or lender.
  6. Be skeptical of any guarantees. Working with a counselor or attorney will significantly increase your chances of saving your home from foreclosure, but no one can guarantee anything in these situations. If it sounds too good to be true, it probably is.
  7. The state of California prohibits any foreclosure consultant from collecting a fee before services are performed.  There are some exceptions for attorneys.
  8. If you do not speak English, use a translator you trust, do not use one provided by anyone else.
  9. Work with a legitimate HUD-approved non-profit or private foreclosure prevention counselor. There are reasons why you should consider both government and private options.

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