Foreclosure Rescue Scams
In many communities, “We Buy Houses” and “Stop Foreclosure” signs are a familiar sight. If you are a desperate homeowner unable to keep up with your mortgage, you may be tempted to call the number on a sign. Don’t. Unfortunately, there have been a slew of con artists that have popped up in recent years who prey on homeowners facing foreclosure. Popular scams include:
Phantom help: The con artists claim they can negotiate an agreement with your lender but they require an upfront fee. They may also ask you to start paying your mortgage to them. After they get your money, they usually disappear. There are some foreclosure rescue agencies that may actually try to contact your lender, but all they are really doing is charging you a fee for something you can do yourself.
Rent to own: The con artists claim that by giving them the title to your house, they will take over your mortgage payments (or find an investor who will) but allow you to stay and pay a reasonable rent. They promise that you can buy back the home in a few years once your financial situation improves. However, the reality is quite different. If there is equity in your home, the scammers may drain it by taking out a home equity loan or refinancing. Once they get their money, they stop paying the mortgage, and you get evicted when the lender forecloses on the home. Other possibilities: they may raise the rent to an unaffordable level and evict you when you cannot pay it or set the purchase price so high that you cannot afford to buy the house back.
Fake refinancing: The con artists claim that they are refinancing your loan to bring it current and have you sign the “loan papers”. However, often what you are really doing is signing over the title of your home, leaving the con artists free to refinance, take out a home equity loan, or sell the home and keep the profit for themselves. Or they may charge you a hefty upfront fee for their “services” and give you bogus paperwork. Once you realize what happens, the con artists – and your money – will likely be long gone.
Buyer scouting: The con artists guarantee that they will find a buyer for you, and you will both split the profits when the home sells. There is just one catch – first you need to hand over the title to your home and move out. Once you move out, instead of finding a buyer, the scammers rent out the home or cash out your equity, and since they neglect to pay the mortgage, your home still goes into foreclosure. You are not necessarily spared from credit report damage either because often only the title is transferred out of your name, not the mortgage.
The fact that there are many con artists out there should not deter you from seeking help – the worst thing you can do if you are struggling with your mortgage is hide your head in the sand. There are legitimate counseling agencies, such as BALANCE, that offer their services free of charge. To speak to a counselor, call us at 888-456-2227. You can also get a list of HUD-approved housing counseling agencies by calling 800-569-4287. Furthermore, don’t be afraid to contact your lender directly and ask for help – they may be willing to modify your loan or work with you in other ways.
If you are facing foreclosure, it is easy to be drawn in by someone offering a quick and easy fix. However, before accepting any assistance, keep in mind the familiar adage: “If it sounds too good to be true, it probably is”.
If you believe that you have already been the victim of a foreclosure rescue scam, contact the Federal Trade Commission at 1-877-FTC-HELP and your state’s attorney general’s office.
Is it a scam? Be wary of people offering help who:
- Pressure you to sign documents without reading them first or discourage you from showing them to a lawyer.
- Ask you to pay the mortgage directly to them.
- Guarantee that they can stop the foreclosure process.
- Require you to pay an upfront fee, regardless of the outcome.
- Ask you to transfer your title to them.
- Discourage you from talking to your lender.
- Only accept payment by cash, cashier’s check, or wire transfer.
- Tell you that you have to accept their offer now or they won’t help you.
- Advertise their services by posting signs or slipping a flyer or business card in your mailbox or under your door.
- Avoid directly answering your questions and tell you to just trust them.