How to Protect Yourself From Mortgage Relief Scams
This easy-to-understand guide will highlight all the signs of a mortgage relief scammer, and make sure you don't fall into one of their traps! After reading this, you'll understand how to tell if you're dealing with a con-artist or a legitimate lawyer.
More Stress For Homeowners in DistressThe possibility of losing your home to foreclosure can be terrifying. The fact that scam artists are preying on desperate homeowners is equally frightening. The Federal Trade Commission (FTC) has a Rule in place to protect homeowners in financial distress. If you agree to have a financial rescue or loan modification company help you, you don't have to pay until you get the results you want.
How the Scams WorkSome con artists sift through public foreclosure notices in newspapers and on the internet or through public files at local government offices. Then they send personalized letters to homeowners. Others take a broad-based approach through advertisements. Watch out for messages like "Stop foreclosure now!" OR "Get a loan modification!" OR "We have special relationships with banks that can speed up the approval process."
Phony Counseling or Phantom HelpThe scam artists tell you that if you pay them a fee, they'll set up a deal with your lender or mortgage holder to lower your mortgage payments or to save your home. They promise to handle all the details for you -- after you pay them a fee, then stop returning your calls and take off with your money. Sometimes, phony counselors insist that you make your mortgage payments directly to them while they negotiate with the lender. They may collect a few months of payments -- and then disappear.
The "Forensic Audit"In another foreclosure rescue scam, the con artist tells you that in exchange for an upfront fee, so-called forensic loan "auditors," mortgage loan "auditors," or foreclosure prevention "auditors" offer to have an attorney or another expert review your mortgage documents to determine if your lender complied with the law. The "auditors" say you can use their report to avoid foreclosure.
Rent-to-Buy SchemesThe con artist who uses the rent-to-buy scheme tells you to surrender the title to your house as part of a deal that allows you to stay there as a renter and buy it back later. They say that surrendering the house title will let a borrower with a better credit rating get new financing and prevent the loss of the home. But the terms of these deals usually are so expensive that buying back your home becomes impossible. You lose the house and the scam artist walks off with the money you put into it. Worse, when the new borrower defaults on the home loan, you're the one who gets evicted.
Bait-and-SwitchIn a bait-and-switch scam, a con artist gives you papers he claims you need to sign to get another loan to bring your mortgage current. But buried in the stack is a document that surrenders the title to your house to the scammers in exchange for a "rescue" loan.
Know Your Rights1. You don't have to pay any money until the company delivers the results you want. It's illegal for a mortgage relief, financial rescue or loan modification company to charge you a penny until it has given you a written offer for a loan modification or other relief from your lender and you accept the offer.
2. Companies must disclose key information. Companies must spell out important information in their advertisements and telemarketing calls, including that:
They're not associated with the government, and their services have not been approved by the government or your lender;
Your lender may not agree to change your loan;
If you stop paying your mortgage, you could lose your home and damage your credit.
3. Companies cannot tell you to stop talking to your lender.
You should always feel free to contact your lender directly to see whether they can offer you additional mortgage payment or loan relief options.
Getting Help From a LawyerSome lawyers may offer to help you get a loan modification or other mortgage relief. Under the MARS Rule, lawyers can require you to pay an upfront fee, but only if:
They're licensed to practice law in the state where you live or where your house is located;
They're providing you with real legal services;
They're following state ethics requirements for attorneys; and
They place the money in a client trust account, withdraw fees only as they complete actual legal services, and notify you of each withdrawal.