Beware of Foreclosure and Mortgage Scams

Scammers are resourceful. They know that foreclosure notices are made public in the following places:

• Newspapers
• Internet
• U.S. Department of Housing and Urban Development (HUD)
• The Federal National Mortgage Association (Fannie Mae)
• The Department of the Treasury lists home seized by the Internal Revenue Service (IRS)
• The  Federal Deposit Insurance Corporation (FDIC) lists homes owned by failed banks.

Knowing this, you can be on guard when they try to reach you through flyers, business cards, newspaper ads, TV, radio, the internet, brochures, and even in person.

Always listen and read closely. Spotting one of these phrases could easily save you time, money, and headaches. The damage done is not always reversible.

• “We can stop your foreclosure!”
• “100% Money Back Guarantee.”
• “Immediate approval!”
• “Low interest rates!”
• “90% success rate!”
• “We pay cash for your home!”

Agencies that offer genuine help rarely use marketing. Beware of aggressive offers to help. Think ahead and equip yourself with the tools provided by the following agencies:

• Better Business Bureau (BBB) of Greater Houston and South Texas
• Federal Trade Commission – Consumer Alerts
• Office of the Attorney General – Consumer Protection
• U.S. Department of Housing and Urban Development (HUD) for Texas
• Texas Department of Housing and Community Affairs (TDHCA) - Foreclosure Resources

No. Not until the work is complete. Federal law under the Mortgage Assistance Relief Services Rule (MARS) states that you must have:

1. No upfront fees.
2. A copy of the written offer from your lender or mortgage servicer
3. Clearly written terms and conditions
4. Payment only after you accept the offer. If you reject it, you pay nothing to the mortgage assistance service provider.

Scammers concentrate on gaining your trust by making promises to fix all your problems. Stop any discussions and do more research if:

• They have official-sounding titles like "lawyer," "law firm," "consultant," or "auditor." When in doubt, don’t hesitate to verify businesses and look up lawyers or law firms.
• They ask you for money up front.
• They told you not to talk to your lender or mortgage company.
• The wording is confusing.
• You are not sure if the transaction allows you to keep your home.
• There are blank spaces that they promise to fill in later.
• There are errors they promise to correct later.

You have a right to receive a copy of anything you sign. So, be sure to leave with an exact copy, including all pages and attachments.

Sometimes they offer direct help. Other times, they play the middle man, and then they try to entice you with special connections designed to save the day. Once scammers have access to your information, they violate your trust by taking your money, your identity, your home, and more.

"Guardian Angels"

• Act as Your Representative: They offer to relieve you of the stress of dealing with the mortgage company by paying them to make the calls about reducing payments or negotiating a deal. They may also tell you to pay your mortgage money directly to them instead of the actual company.
• Forensic Audit: They claim to have an attorney or expert do a very detailed review of your loan agreement. Then, they have you pay them upfront to look for errors. They give you false hope that the report will allow you to avoid foreclosure, get a loan modification, change the amount owed, or even cancel the loan.

"Lucky Day"

• Low Interest Mortgage Loan: Immediate acceptance prompts faxes of documentation and transfers of money. This trick doubles the damage because you will have to deal with identity theft and a greater risk of foreclosure.  
• Fake Offer to Refinance: They encourage you to save your house by redoing the financial agreement of your loan. They take advantage of the fact that you may not understand the wording, or you may not read each page. Then, when you are ready to sign the large stack of fake refinance paperwork, they hide a deed transfer document in the bottom of the stack.  
• Loan Flipping: Lenders entice you with money and prizes to get you to refinance multiple times. Since you may not be aware of prepayment penalties, you get a new prize, but you also get penalized with higher and higher interest rates.

"Special Arrangements"

• Lease to Repurchase: They convince you to sign over the house with a deed transfer and rent until you can buy it back. Then, they either make it too expensive to buy back or keep raising the rent until you can’t pay, and they evict you.
• Equity Skimming: They promise to find you a buyer, and split the profit when it sells, but you have to sign over the deed and move out first. When you move out, they rent it and keep the house, the money, and the equity while you still go through foreclosure!

Note: The name on the deed tells who owns the house. The name on the mortgage loan tells who owes the money. A new name on the deed means new owner. The same name on the mortgage loan means the same person still owes all the money on that house.

• Equity Stripping: A shady lender will entice you to lie about your income to get a loan that they know you can’t pay. Payments may start low because you are only paying the interest, and later on, payments increase suddenly because of a balloon payment. The minute you default on the loan, they take your house and keep the equity.