Stop Foreclosure
PROTECTING
AMERICA'S
HOMEOWNERS
Foreclosure Scams
Foreclosure Scams: You Are A Target For Fraud
Unfortunately there are people out there that want to profit from your financial misfortune. If you are facing foreclosure you are vulnerable to these scam artists. In fact, you are their primary target.
How do they find you? It's easy. Once your lender files your foreclosure notice with the public trustee the public must be notified, usually by a listing in your local or community newspaper. When this occurs you will likely be bombarded with mail, phone calls, and even personal visits by people claiming to be able to help you. These crooks watch the foreclosure listings like sharks circling their prey.
These predators will arrive at your doorstep at the most opportune time posing as caring allies who can 'creatively' solve your problems. In effect they are only interested in stealing your hard earned equity or even your home itself. Are they all bad? Of course not. Some of the people approaching you are professional real estate investors who act ethically and honestly. Unfortunately it is difficult to until its too late.
You can usually spot these scam artists by their bogus titles such as 'foreclosure specialist' or 'foreclosure consultant'. These titles are red flags. They will act like your friend, give you false hope, and tell you everything you want to hear. Be very skeptical of anyone claiming that they can help you. Tell them upfront you will be looking into their qualifications, background, and business standing. That should send the worst of them away. For those remaining, you’ll need to know the three primary techniques they will employ to try to rip you off.
Foreclosure Scam #1 - Equity Skimming
The most commonly used of the foreclosure scams is a technique called Equity Skimming. In this scam a person claiming to be a buyer will approach you. They will promise to get you out of your foreclosure dilemma by paying off your mortgage and giving you a sum of money when the property is sold. The "buyer" will probably suggest that you deed the property to them, move out, and discontinue communication with your mortgage lender.
Typically the scam will play out by the buyer renting out your home to a third party and collecting rental payments for a few months. During this time they will not make any of your mortgage payments and will allow your lender to foreclose on the property. Signing over your deed to someone else does not relieve you of your obligation on the loan.
If you are reluctant to sell your home to them they may offer to 'lease it' back to you if you agree to deed the property to them. On the surface this option may seem appealing since you can remain in your home - but don't be fooled. This almost always leads to disaster.
Usually these crooks will promise to sell your property back to you on a future date after the threat of foreclosure subsides. Arrangements like these usually end up benefiting only the person or company approaching you. Do not risk it. Once you sign over the deed to your home you lose control of it. They will have the ability to borrow against your home or even sell it without your permission.
Foreclosure Scam #2 - Bait & Switch Loans
The second most common technique used in foreclosure scams involves a phony loan transaction. You are presented with documents that appear to be a refinance loan that will bring your delinquent loan current. But in reality the documents may be cleverly worded to transfer title of your home to their company for only a fraction of its value. Or if the loan doesn't transfer title to them it still may have undisclosed, hidden traps in the terms that can spell disaster for you. Common traps such as outrageous fees, interest-only payments, immediate rate adjustments, balloons, and prepayment penalties.
You have to know exactly what you are agreeing to. Once you sign the documents, even if the terms were not explained correctly, you will be responsible for those terms upon the funding of the loan. Always have an attorney review any such transaction in advance before signing anything. If you are pressured in any way to enter into an agreement regarding your home you can safely assume that you are being victimized.
Foreclosure Scam #3 - The Phony Expert
The third most common technique used to separate you from your money is the bogus 'expert'. Here you are approached by someone offering to help you solve your foreclosure problems for a fee. Usually the help entails simple tasks that you can do yourself for free - such as negotiating a payment plan with your lender. The worst of these individuals will simply take your money and walk away without helping at all. Never agree to pay anyone up front for their foreclosure services.
In summary here are the basic rules to follow to avoid foreclosure scams:
- Never agree to deed your property to anyone
- Assume the person approaching you is more interested in the money they can make than
they are with solving your problem
- Never pay any money upfront to people claiming to be experts or specialists
- Never sign any document you don't fully understand
- Do not allow yourself to be intimidated by pressure or threats from any third party
- Make sure you get all "promises" and offers in writing
- Any agreements or offers should be reviewed by an attorney before you sign anything
- Always remember that verbal agreements mean nothing
- Beware of any contract of sale or loan assumption where you are not formally released from
liability for your mortgage debt
- Check with your lender before entering into any agreements affecting your property
- Never agree to pursue a new loan with monthly payments you know you will have trouble
making
- Never sign any document that has blank lines or spaces to be filled in later
- If you don't speak English use your own translator. Don't rely on anyone else's translator
- If you are selling the home yourself to avoid foreclosure, check to see if there are any
complaints against the prospective buyer. You can contact your state's Attorney General,
the State Real Estate Commission, or your local District Attorney's Consumer Fraud Unit for
this type of information
- Be especially aware of 'affinity marketing' techniques offering you help. For example
Christians helping fellow Christians, Hispanics helping Hispanics, etc. There has been an
increase in scam artists looking to exploit people that share a common interest, belief, or
social group. Their goal is to gain your trust through a common thread and get you to let
your guard down
Our government is finally taking action against foreclosure scams. Ten states so far have passed legislation to prevent foreclosure-rescue fraud. These states are California, Colorado, Georgia, Illinois, Maryland, Minnesota, Missouri, New York, Ohio, and Rhode Island. Most of these new laws allow duped homeowners the chance to cancel any ‘rescue’ transaction just prior to closing.
If you think you are being scammed contact the Federal Trade Commission (FTC) toll free at (877)FTC-HELP - (877)382-4357. Their webpage is located at:
www.ftc.gov/bcp/conline/pubs/homes/eqscams.htm
One last note regarding foreclosure scams. People looking to rip you off don’t necessarily have to be strangers. Incredibly, some of the worst foreclosure fraud cases I've seen involved family members. So make sure any offers from friends or family meet the same criteria and are in your best interest.
The bottom line on avoiding foreclosure scams is the application of an old adage – if something sounds too good to be true it probably is.
Foreclosure Scams | A Case Study:
I received a call from a woman named Cindy last September. Cindy was desperate. She needed help. She told me her husband Brian was laid off and became seriously ill before he could find a new job. He required hospitalization.
They had a sizable mortgage payment but it was never a big deal since they were always a two-income family. The home they lived in was originally owned by Brian's mother who had passed away a few years earlier. It was the home Brian played in as a kid. He had great memories there.
During Brian's health crisis they managed to survive off credit cards despite their mounting debt and medical bills. Then one by one, each credit card became maxed out. Then they missed their first mortgage payment. Then two. After three months went by without a house payment they received a Notice Of Default from their lender threatening foreclosure.
Desperate, Cindy didn't know where to turn. Then one day there was a knock at her front door. There stood a well-dressed gentleman claiming he had the ability to help her solve her mortgage problems. He called himself a 'foreclosure rescue specialist'. What luck she thought.
Cindy was skeptical but also under enormous pressure. Since it seemed nobody else could help them she decided to give this guy a shot. He proposed 'buying' their home and leasing it back to them with the chance to buy it back at a later date. In exchange, they could remain in the home and make their lease payments to him. It made sense.
After they signed some papers the man paid their mortgage current and even gave them $5.000 cash to catch up on other bills. Not bad.
At first everything seemed to go as planned. What Cindy really didn't understand is that they had just deeded their property to him. Technically they no longer owned their home. He did.
He charged them $1,600.00 in monthly lease payments when he had promised them their payments would be slightly less than their normal mortgage payments of $1,244.00. Since Cindy had already spent the $5,000 on other bills they were unable to make even the first monthly payment to him.
Sure enough he started eviction proceedings immediately. After all, he owned their home now and they were only tenants. Sadly, this was probably his strategy all along.
Because Cindy won't sure exactly what she and her husband had signed and since she felt they didn't have the money to hire an attorney they just walked away. They walked away from his mother's home. The home Brian grew up in. They also walked away from equity they desperately needed had they only sold the house the right way. They walked away from their dreams.
It was a sad story. I wanted to help Cindy and Brian so badly but by the time they came to see me it was already too late.
Please don't become another victim of foreclosure scams.
