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Foreclosure Scams: Some Types of Help to Avoid
Just as the government and non-profit groups are working to help homeowners stay in their houses, scam artists are working equally hard to steal money from owners desperate to keep their homes. If you are in danger of a foreclosure, then you should be aware that you may be the next target of a scam. Following a few simple steps, however, will help protect both you and your home from the unscrupulous.
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How do Scam Artists Find You?
If you are confused about how you could wind up the victim of a foreclosure scam, the answer is both simple and startling. Often the scam artist will search through foreclosure notices in the paper or on the internet to find homeowners who are on the verge of losing their home, and therefore at their most desperate, and then send them a personalized letter. Still other scam artists appear legitimate by advertising on television, radio, or in the paper.
Their litany of claims may sound familiar. They will advertise that they can "Stop Foreclosure Now!" or "Keep Your Home Despite the Scheduled Sale!" Others may offer guarantees that you will be able to avoid foreclosure (a legitimate counselor would never offer guarantees) or cite to inside relationships with lenders that help them slow down or stop the foreclosure.
An Upfront Fee
While the scam artist is busy promising foreclosure help, he or she is equally busy demanding an upfront fee. In other words, his or her results can only be guaranteed if you pay $500 immediately, in cash, wire transfer, or a money order. Of course, once you pay your fee, you will likely never hear from the individual again.
Even worse, the scam artist may have you send your mortgage payments directly to him or her, so the payments can be used in negotiations with the bank. Unfortunately, not only will the scam artist not help, but he or she now has your mortgage payments as well, thereby pushing you even closer to the foreclosure ledge.
From Homeowner to Renter?
Some scam artists will purchase your house now for a small fee (although in some cases, they may not charge you anything at all), and then you will rent your own home until you can afford to take over the payments. In the process, you have signed over your deed, along with all of your equity. At this point, the scam artist may evict you, raise your rent to the point you can't afford it, or just default on the mortgage so your house is sold.
The scam artist might also find a buyer for you, but you have to move out and sign the deed over to the scam artist. Once he or she sells the home, then you will receive a portion of the money. In reality, the scam artist rents the home out, pockets the money, and defaults on the loan. Because transferring your deed has nothing to do with your obligation to pay your mortgage, you still lose your home and you have the added expense of moving out, finding a new home, and making rent payments.
Switching Papers to Save Your Mortgage
Be sure to read any papers carefully before signing. Sometimes scam artists will pose as counselors and have you sign papers to make your mortgage current. Instead of helping your mortgage, you are really signing away your deed and all of your equity.
Signs to Avoid
Avoid any business or individual which requires or promises the following:
- Offers guarantees that you will be able to keep your home. No one but your lender can stop foreclosure or modify your loan.
- Speaks exclusively to your lender on your behalf and discourages you from calling him. A legitimate counselor will encourage you to speak with your lender in order to work out some sort of workable arrangement.
- Requires an upfront fee and only accepts wire transfers or money orders as payment. A legitimate counselor or company would never require upfront fees. Most of the HUD approved counselors work through a non-profit, so their service is free to you. Even if there is a charge, you would not be required to wire the money or some other high pressure payment technique.
- Pressures you to sign paperwork immediately or asks you to sign blank forms that they will fill in later. Never sign papers that are not completely filled out. Further, an honest counselor or company will want you to know exactly what you are filling out in order to ensure that you will be able to make payments.
- Requests that you make payments directly to him, rather than your bank. No one is entitled to your mortgage payment but the lender. Never alter your mortgage payment schedule or routine unless you receive instructions directly from the lender.
Published on BankingQuestions.com 3/17/09
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