Foreclosure Scams and How to Avoid Them
|A Resource Guide to Foreclosure Rescue Scams|
If you are homeowner in danger of losing your home to foreclosure, you'll need to be aware of any number of schemes to defraud you that crop up from time to time. In recent years, agencies from state attorneys general to Better Business Bureau offices report that foreclosure rescue scams have been their number-one complaint.
The Federal Trade Commission, among other agencies, have developed considerable resources to educate distressed homeowners on how to avoid foreclosure rescue scams. Among the warning signs are ads which read:
- Stop Foreclosure Now!
- We guarantee to stop your foreclosure.
- Keep Your Home. We know your home is scheduled to be sold. No Problem!
- We have special relationships within many banks that can speed up case approvals.
- We Can Save Your Home. Guaranteed. Free Consultation
- We stop foreclosures everyday. Our team of professionals can stop yours this week!
If you, or someone you know, is faced with foreclosure, there are things you can do -- and some things you shouldn't.
In one typical scheme known as the scam is the rent-to-buy scam, an investor (either an individual or a company) will offer to buy the home for the outstanding amount of the mortgage. The investor promises to make the mortgage payments and collect rent from the (ex-)homeowner, who gets to stay in the home until he gets back on his feet.
Once the new owner has the title, however, he simply re-mortgages the property for as much cash as possible, never makes a payment, and disappears with the cash, even as he continues to collect the 'rent.' The ex-homeowner ends up with nothing, losing even the little equity he had in his former home.
In other instances, a company will offer to negotiate with the lender to stop foreclosure and refinance the loan -- after collecting a hefty up-front fee. Usually, though, the company rarely follows through.
What You Should Do
There are several legitimate agencies that can help, but before signing anything, read the Federal Trade Commission's free booklet How to Recognize a Foreclosure Rescue Scam (PDF).
Here's a list of other resources. We're constantly adding to this list, so check back often. We'll also be blogging news and more resources on this topic.
Warning Signs of a Scam
According to the FTC, you should avoid any business that:
- Guarantees to stop the foreclosure process -- no matter what your circumstances
- Instructs you not to contact your lender, lawyer, or credit or housing counselor
- Collects a fee before providing you with any services
- Accepts payment only by cashier's check or wire transfer
- Encourages you to lease your home so you can buy it back over time
- Tells you to make your mortgage payments directly to it, rather than your lender
- Tells you to transfer your property deed or title to it
- Offers to buy your house for cash at a fixed price that is not set by the housing market at the time of sale
- Offers to fill out paperwork for you
- Pressures you to sign paperwork you haven't had a chance to read thoroughly or that you don't understand.
- If you're having trouble paying your mortgage or you have gotten a foreclosure notice, contact your lender immediately.
|CFPB's Foreclosure Scam guide||Consumer Financial Protection Bureau's advisory|
|HopeNow Organization||A HUD-backed connection for borrowers and lenders|
|Homeownership Preservation Foundation||Independent nonprofit that provides HUD-approved counselors dedicated to helping homeowners.|
|Guide to Avoiding Foreclosure||HUD's Main Foreclosure Help Page|
|HUD Approved Housing Counseling Agencies||Local Agencies in your State who can help|
|Beware of Foreclosure Rescue Scams||The government's "Making Home Affordable" scam guide.|
|Mortgage Foreclosure Resources||Federal Reserve's main Foreclosure Help Page. Includes links to resource centers near you.|