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Foreclosure Rescue Scams: How to Spot and Avoid Them

This article provides information on how to spot and avoid scams regarding foreclosure, mortgage relief scams and other foreclosure prevention options.

Mortgage Relief Scams

How the Scams Work

Fraudsters use a variety of tactics to find homeowners in distress. Some sift through public foreclosure notices in newspapers and on the internet or through public files at local government offices, and then send personalized letters to homeowners. Others take a broader approach through ads on the internet, on television or radio, or in newspapers; posters on telephone poles, median strips, and at bus stops; or flyers, business cards, or people at your front door. The scam artists use simple – but potentially deceptive – messages, like:

  • "Stop foreclosure now!"
  • "Get a loan modification!"
  • "Over 90% of our customers get results."
  • "We have special relationships with banks that can speed up the approval process."
  • "100% Money Back Guarantee."
  • "Keep Your Home. We know your home is scheduled to be sold. No Problem!"

Once they have your attention, they use a variety of tactics to get your money. By knowing how their scams work, the FTC says you'll be better able to defend against fraud.


Phony Counseling or Phantom Help
The scam artists tell you that if you pay them a fee, they'll negotiate a deal with your lender to reduce your mortgage payments or to save your home. They may claim to be attorneys or represent a law firm. They may tell you not to contact your lender, lawyer, or credit counselor. They promise to handle all the details once you pay them a fee. Then they stop returning your calls and take off with your money.

Sometimes, phony counselors insist 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 exchange for an upfront fee, so-called forensic loan "auditors," mortgage loan "auditors," or foreclosure prevention "auditors" offer to have an attorney or other 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, speed the loan modification process, reduce what you owe, or even cancel your loan. In fact, there's no evidence that forensic loan audits will help you get a loan modification or any other mortgage relief.


Rent-to-Buy Schemes
Con artists who use the rent-to-buy scheme tell 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 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 loan, you're the one who's evicted.

In a variation, the scam artist raises the rent over time so you can't afford it. After missing several rent payments, you're evicted, leaving the "rescuer" free to sell the house.

In a similar equity-skimming scam, fraudsters offer to find a buyer for your home, but only if you sign over the deed and move out. They promise to pay you a portion of the profit when the home sells. Once you transfer the deed, they simply rent out the home and pocket the proceeds while your lender goes ahead with the foreclosure.

The result: You lose your home – and you're still responsible for the unpaid mortgage because transferring the deed does nothing to transfer what you owe on the mortgage.
 

Beware of Unethical Mortgage Foreclosure Rescue and Loan Modification Operators

Beware of Unethical Mortgage Foreclosure Rescue and Loan Modification Operators

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”, “mortgage consultant,” and market themselves as a “foreclosure service”, “foreclosure rescue agency” or “loan modification company”. They count on homeowners being vulnerable and desperate. 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.

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.

Click the link below for more information from the FTC