Job loss, health issues and the loss of a spouse, among other circumstances, can leave local consumers struggling to meet mortgage obligations and looking for help.
But not all mortgage assistance companies are looking out for the best interests of their clients.
Homeowners struggling to make payments on their mortgages and other debts should beware of con artists and scams that promise to save their homes and eliminate their debts.
These so-called foreclosure or mortgage consultants often use public notices or lists of distressed borrowers purchased from private companies to find their “targets.”
They may offer to “prevent” foreclosures or “rescue” desperate homeowners from foreclosure through advertising, e-mail, phone calls, or in person.
Financially troubled homeowners can avoid foreclosure prevention scams by working with housing counselors approved by the U.S. Department of Housing and Urban Development (HUD).
Assistance from HUD-approved housing counselors is free, and homeowners can reach them by calling 1-888-995-HOPE (4673) or visiting makinghomeaffordable.gov.
Listed below are common foreclosure scams designed to take advantage of desperate homeowners looking to save their homes:
- Foreclosure rescue and refinance fraud. Scam artists offer to act as intermediaries between homeowners and lenders and to negotiate repayment plans or loan modifications. In reality, they may pocket your money and leave you in worse shape on your loan.
- Fake “government” modification programs – Scam artists create Web sites that mimic federal Web sites and use business names similar to those used by government agencies These tactics are designed to fool you into thinking they are approved by, or affiliated with, the federal government.
- Leaseback and rent-to-buy schemes – Con artists entice you to transfer the title of your home to them with promises of new and better financing. They say you can rent your home and eventually buy it back. But, if you do not comply with the terms of the rent-to-buy agreement, you can lose your money and your home. The agreement may be written in a way that makes it very hard to comply. The con artists have no intention of ever selling your home back to you. They want your home and your money.
- Bankruptcy scams – Filing for bankruptcy is rarely a permanent solution to prevent foreclosure. Filing for bankruptcy brings an “automatic stay” into effect that stops any collection and foreclosure action while the bankruptcy court administers the case. Eventually, you must make payments on your mortgage, or the lender has the right to foreclose. In addition, bankruptcy lowers your credit score and remains on your credit report for up to 10 years.
- Debt-elimination schemes – Scam artists use illegitimate legal arguments to persuade you that they can “eliminate” your debt and that you are not obligated to pay back your mortgage. They make inaccurate claims about applicable laws and finance, such as “secret laws” that allow you to erase your debts or imply that banks do not have the authority to lend money.
How to Protect Yourself From Mortgage Modification and Foreclosure Rescue Scams:
- Contact your lender or mortgage servicer. Talk with an agent in the loss-mitigation department about mortgage modification options and other alternatives to foreclosure.
- Ask a legitimate housing or financial counselor for help. HUD-approved housing counselors are available at 1-888-995-HOPE (4673) or makinghomeaffordable.gov. They do not charge a fee for this assistance.
- Make all mortgage payments directly to your lender or mortgage servicer. Do not trust anyone to make mortgage payments for you. Do not stop making your payments.
- Do not sign over your deed without consulting a trusted expert. Foreclosure scams often involve the transfer of homeownership to a third party. Never agree to a title transfer before considering advice from your lawyer, financial adviser, credit counselor, or another independent person you can trust. When you sign over your deed, you lose your rights to your home and any equity you have, but you remain obligated to satisfy the terms of the mortgage.
- Get promises in writing. Do not accept oral promises and agreements involving your home, because they usually are not legally binding. Protect your rights with a written document or a contract signed by the person making the promise. Keep copies of all contracts that you sign. Never sign anything that you don’t understand and agree to.
Any provider offering foreclosure rescue assistance must disclose the following:
- The amount of any fees associated with the service;
- That the provider is not associated with the government, and that its services have not been approved by the government or the homeowner’s lender;
- That the lender or servicer may not agree to change the homeowner’s loan;
- That the homeowner may stop doing business with the provider of the mortgage relief servicer.