Tips for Avoiding Mortgage Foreclosure Rescue and Loan Modification Scams
A fairly new and dangerous threat has arisen for homeowners who have fallen behind on their mortgage payments and may be at risk of foreclosure -- opportunistic companies. They often refer to themselves as a "foreclosure consultant" or "mortgage consultant," and market themselves as a "foreclosure service", "foreclosure rescue agency" or "loan modification company." They count on homeowners being vulnerable and desperate.
Beware of Unethical Mortgage Foreclosure Rescue and Loan Modification Operators
These companies claim they can assist homeowners facing foreclosure with options that allow them to keep their property, refinance or modify an existing mortgage, repair credit or help "buy more time." In reality, these "options" are intended to convince you to take the wrong steps so they can take your money and possibly your home.
It is important that you take action by contacting your mortgage lende
Remember the old saying, "If it's too good to be true, it probably is. " Be safe. It is important that you take action by contacting your mortgage lender -- or any legitimate financial counselor -- to find real options to avoid foreclosure. A number of agencies provide free counseling services to homeowners who are having trouble making ends meet (see the "Protect Yourself and Resources Sections"). These agencies can help you explore your options, which may range from modifying your loan to refinancing your loan to selling your home and using any equity to start over.
Lease-Back or Repurchase Scams
In this scenario, a promise is made to pay off your delinquent mortgage, repair your credit and possibly pay off credit cards and other debt. However, in order to do this, you must "temporarily" sign your deed over to a "third party" investor. You are allowed to stay in the home as a renter with the option to purchase the home back after a certain amount of time has passed or your financial situation improves. The trouble is once you have signed away your rights in your property, you may not be able to repurchase the property later, even if you can and want to. After the new owner takes ownership of your property, the new owner can evict you. Furthermore, the scammer is under no obligation to sell the house back to you. Typically, after the deed is signed away, the property changes hands numerous times. The scammer may have taken a new mortgage out on your home for hundreds of thousands of dollars more than your mortgage, making it impossible for you to buy back your home.
Partial Interest Bankruptcy Scams
The scam operator asks you to give a partial interest in your home to one or more persons. You then make mortgage payments to the scam operator in lieu of paying the delinquent mortgage. However, the scam operator does not pay the existing mortgage or seek new financing. Each holder of a partial interest then files bankruptcy, one after another, without your knowledge. The bankruptcy court will issue a "stay" order each time to stop foreclosure temporarily. However, the stay does not excuse you from making payments or from repaying the full amount of your loan. This complicates and delays foreclosure, while allowing the scam operator to maintain a stream of income by collecting payments from you, the victim. Bankruptcy laws provide important protections to consumers. This scam can only temporarily delay foreclosure, and may keep you from using bankruptcy laws legitimately to address your financial problems.
While there are legitimate refinancing programs available, look out for people posing as mortgage brokers or lenders and offering to refinance your loan so you can afford the payments. The scammer presents you with "foreclosure rescue" loan documents to sign. You are told that the documents are for a refinance loan that will bring the mortgage current. What you don't realize is that you are surrendering ownership of your home. The "loan" documents are actually deed transfer documents, and the scammer counts on your not actually reading the paperwork. Once the deed transfer is executed, you believe your home has been rescued from foreclosure for months or even years until you receive an eviction notice and discover you no longer own your home. At that point, it is often too late to do anything about the deed transfer.
Internet and Phone Scams
Some scam lenders convince you to apply for a low-interest mortgage loan on the phone or Internet. They then extract vital information, such as your social security and bank account numbers. In this scam, the loan is immediately accepted, after which you start faxing the documents and sending wire transfer payments to the phony company without even meeting the lender. Unfortunately, this scam will put you in twice as much trouble--your personal details have been stolen or sold, putting you at risk of identity theft, and your home is still at risk of foreclosure.
Phantom Help Scams
The scam operator presents himself as someone who is able to help a homeowner out of foreclosure or qualify for a government loan modification or refinance program. In exchange for his or her "services," outrageous fees are charged and grand promises are made for robust representation, which never occurs. The "services" performed entail light paperwork or occasional phone calls that you could easily have made yourself. In the end, you are worse off than before, because you have little or no time to save your home, or seek other assistance.
"buyer" offers to get you out of financial trouble by promising to pay off your mortgage or give you an amount of money when the property is sold. The "buyer" may encourage you to move out quickly and deed the property to him. The "buyer" collects rent for a period of time but does not make any mortgage payments, allowing the lender or loan servicer to foreclose. Even though you've signed over your deed, you are still obligated to pay the loan!
You are tricked into signing over your home's title based on the belief that you can stay in the home as a renter and be able to buy the home back over time. Unfortunately, the terms of the buy-back are impossible to meet, so you lose your home while the "rescuer" gets the equity.
A "rescuer" charges extremely high fees for phone work or paperwork that you, the borrower, could easily do yourself. None of the "rescuer's" efforts save the home. This scam gives you a false sense of hope, preventing you from seeking qualified help. Phone Counseling Agencies -- These agencies charge a fee for services you can do yourself for free. For a list of qualified housing counselors, visit http://foreclosurehelp.nv.gov/HousingCounselors.htm.
Don't Get Scamed, Get a Lawyer
He may not get you out of trouble but he will not make it worse.