This may be, sadly, a record year for foreclosure filings. According to RealtyTrac, the United States is on pace for more than 1 million bank repossessions this year alone!
In an attempt to help struggling homeowners, over the last year or so, Congress has passed a series of bills that will hopefully offer some type of relief to some families facing the threat of home foreclosure. Unfortunately, however, there are ruthless con artists using our country’s weak housing market and credit crisis to try to rip off millions of cash-strapped Americans.
Fraudulent foreclosure "rescue" professionals use half-truths and outright lies to sell services that promise relief and then fail to deliver, according to the Federal Trade Commission (FTC).
Their goal is to make a quick profit through fees or mortgage payments they collect from you, but do not pass on to the lender. Sometimes, they assume ownership of your property by deceiving you, the homeowner. Then, when it’s too late to save your home, they take the property or siphon off the equity. You’ve lost your home to foreclosure despite your best intentions.
If you think you may be facing foreclosure, the FTC offers some tips on how to recognize foreclosure rescue scams:
How the Scams Work: Foreclosure rescue firms use a variety of tactics to find homeowners in distress. Once these potential scammers have your attention, they use a variety of tactics to get your money:
1. Phony Counseling or Phantom Help: The scam artist tells you that he can negotiate a deal with your lender to save your house if you pay a fee first. You may be told not to contact your lender, lawyer, or credit counselor, and to let the scam artist handle all the details. Once you pay the fee, the scam artist takes off with your money.
Sometimes, the scam artist insists that you make all mortgage payments directly to him while he negotiates with the lender. In this instance, the scammer may collect a few months of payments before disappearing.
2. Bait and Switch: You think you’re signing documents for a new loan to make your existing mortgage current. This is a trick: you’ve signed documents that surrender the title of your house to the scam artist in exchange for a “rescue” loan.
3. Rent-to-Buy Scheme: You’re told to surrender the title as part of a deal that allows you to remain in your home as a renter, and to buy it back during the next few years. You may be told that surrendering the title will permit a borrower with a better credit rating to secure new financing — and prevent the loss of the home. But the terms of these deals usually are so burdensome that buying back your home becomes impossible. You lose the home, and the scam artist walks off with all or most of your home’s equity. Worse yet, when the new borrower defaults on the loan, you’re evicted.
In a variation, the scam artist raises the rent over time to the point that the former homeowner can’t afford it. After missing several rent payments, the renter — the former homeowner — is evicted, leaving the “rescuer” free to sell the house.
In a similar equity-skimming situation, the scam artist offers to find a buyer for your home, but only if you sign over the deed and move out. The scam artist promises to pay you a portion of the profit when the home sells. Once you transfer the deed, the scam artist simply rents out the home and pockets the proceeds while your lender proceeds with the foreclosure. In the end, you lose your home — and you’re still responsible for the unpaid mortgage. That’s because transferring the deed does nothing to transfer your mortgage obligation.
4. Bankruptcy Foreclosure: The scam artist may promise to negotiate with your lender or to get refinancing on your behalf if you pay a fee up front. Instead of contacting your lender or refinancing your loan, though, the scam artist pockets the fee and files a bankruptcy case in your name — sometimes without your knowledge.
A bankruptcy filing often stops a home foreclosure, but only temporarily. What’s more, the bankruptcy process is complicated, expensive, and unforgiving. For example, if you fail to attend the first meeting with the creditors, the bankruptcy judge will dismiss the case and the foreclosure proceedings will continue.
If this happens, you could lose the money you paid to the scam artist as well as your home. Worse yet, a bankruptcy stays on your credit report for 10 years, and can make it difficult to obtain credit, buy a home, get life insurance, or sometimes get a job.
Where to Find Legitimate Help:
According to the FTC, if you’re having trouble paying your mortgage or you have gotten a foreclosure notice, contact your lender immediately. You may be able to negotiate a new repayment schedule. Remember that lenders generally don’t want to foreclose; it costs them money.
In addition, you may want to contact a credit counselor through the Homeownership Preservation Foundation (HPF), a nonprofit organization that operates the national 24/7 toll-free hotline at 1.888.995.HOPE. Also, go to the U.S. Department of Housing and Urban Development's website at hud.gov for more information.
If you think you’ve been a victim of foreclosure fraud, contact the Federal Trade Commission, your state attorney general, your local Better Business Bureau, and your local police agency.
For more details on foreclosure scams and related issues, go to www.ftc.gov. Also be sure to check with your attorney for more information on this important topic.
My Final Thoughts:
Facing the worst recession in decades and with an intense housing crisis in many parts of our United States, now, as always, is the time to be extremely careful when examining any offers related to your finances and investments.
In addition to the many legitimate and honest firms in the marketplace, unfortunately there are also a few criminal vultures just waiting to take advantage of these trying economic times that face our country.
Copyright 2010 by Bruce Mandelblit
Bruce Mandelblit (www.CrimeZilla.com) is a nationally known security and safety journalist, as well as a recently retired, highly decorated reserve law enforcement officer. His e-mail address is [email protected].
This column is provided for general information purposes only. Please check with your local law enforcement agency and legal professional for information specific to you and your jurisdiction.
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