Tips How Not To Become A Victim Of Foreclosure Rescue Scams

A growing number of scam artists offering to "rescue" homeowners in financial distress are popping up everywhere due to the rising foreclosure rates in this country. They are targeting people of all ages with a wide variety of scams. It is important to remember that anyone can become a victim of these scams.

These scam artists advertise to "save your home" or "pay your mortgage".  Actually they are only interested in generating a quick profit for themselves or stripping away the value of your home with absolutely no benefit to you. The scams commonly revolve around heavily promoted deals supposedly designed to help those who have fallen behind on their mortgage payments and save their homes from facing foreclosure. The reality is that scam artists can evict you from your own home, turn around, and sell it on the open market.

How a foreclosure rescue scam works:

There are several ways that a "rescuer" locates distressed homeowners such as public foreclosure notices in newspapers, on the Internet, or at government offices. The "rescuer" then contacts the homeowner by phone, personal visit, card, or flyer left at the door, or advertising. The initial contact typically centers on a message that tells homeowners that they can stay in their house easily, get a "fresh start," keep their credit rating, or receive instant cash.

During the first consultation they will cut off the homeowner's access to legitimate financial solutions by convincing them to stop all contact with lenders, credit counselors, or lawyers and to let them handle all the details.

The scam artist normally looks to make a quick profit from fees or direct mortgage payments that are never passed on to the lender. In some cases the scammer assumes ownership of the property by misleading the homeowner.

Once it is too late to save the home, the owner loses the home to foreclosure after it has been drained of equity through fees and charges or the "rescuer" takes over the property from the homeowner.

Some of the most common foreclosure scams:

Ø  The Bait and Switch: The homeowner is purposely deceived and therefore does not understand that he is selling their home in exchange for a bogus "rescue”. Many homeowners believe they are signing documents for a new loan or other financial arrangement that would allow them to retain ownership by paying off mortgage payments that are past due.

Ø  The False Intermediary: The "rescuer" charges an upfront fee or very high fees to "save" the home by negotiating with the lender or promising to quickly find a buyer for the home. The scammer usually seals the homeowner off from legitimate help or legal relief by telling the owner that he should not talk to the lender, or seek out credit counseling or legal advice. Once the fees are paid, he vanishes with a quick and easy profit. The homeowner is usually left without enough help to save the home and with little or no time left to prevent foreclosure. Sometimes, the scammer will insist that a homeowner make all mortgage payments directly to him while he negotiates with the lender. He may collect a few months' worth of payments before disappearing.

Ø  The Bogus Rent-to-Buy Scheme: The homeowner surrenders ownership of their home under the assumption he will be able to pay rent and then buy the home back over a few years. The terms of the buy-back deal are usually stacked against the homeowner, with the resale price well above market value. Sometimes, the scam artist hikes rental fees significantly over time. Once the former homeowner misses rent payments, the family is evicted, leaving the "rescuer" free to sell the house. Even if the former homeowner is able to pay the rent, the terms of the buy-back are so burdensome that he ends up losing possession of the house and the scam artists keep all of the equity.

How to identify if a company is legitimate:

Legitimate companies’ representatives will consult with the homeowner, collect documentation, and explain the process in full detail so the homeowner can make an informed decision. All of the companies’ promises and agreements will be available to the homeowner in writing. Their representatives will not object to your desire to consult a lawyer, credit or housing counselor, family member, friend, or any other expert resource.

Most legitimate companies do not solicit business through high-pressure direct marketing, nor will they make promises up front to save your home, offer immediate cash, or save your credit rating.

It is important that you contact your lender, a credit or housing counselor, or a lawyer and explain your situation before you sign any contracts. Check out companies you plan to deal with at www.bbb.org.

Some of the red flags to keep in mind:

Homeowners should proceed with extreme caution if an individual or company:

Ø  Addresses them self as a "mortgage consultant" or "foreclosure service"

Ø  Makes contacts with people whose homes are listed for foreclosure, including those who uses flyers, solicits for business door-to-door, phone, or email

Ø  Who encourages you to lease your home so you can buy it back over time

Ø  Collects a fee before providing you any of their services

Ø  Instructs you to cease all contact with your lender, credit or housing counselors, lawyer or other legitimate experts

Ø  Request that you to make your mortgage payments directly to them or their company, and not to the lender

Ø  Requires that you transfer your property deed or title to them or their company

Ø  Makes promises that seem too good to be true, for example, instant cash with "no strings attached"

Ø  Tells you that as part of the deal you will need to move out of your home for some period of time for remodeling or other reasons

Ø  Offers to buy your house for cash at a fixed price that is not set by the housing market at the time of sale

You can find additional information at the U.S. Department of Justice U.S Trustee Program's list of warning signs at http://www.justice.gov/   

What a homeowner should NEVER DO:

Ø  Don't be pressured to sign a contract. Take your time to review all documents thoroughly, preferably with a lawyer who is representing your interests only.

Ø  Don't send or give your mortgage payments to someone other than your lender, even if he promises to make the payments for you

Ø  Don't sign away ownership of your house to anyone without advice from a credit or housing counselor or lawyer

Ø  Don't rely on verbal agreements because they mean nothing. Get all promises in writing and keep copies of all documents, especially those you sign

Ø  Don't sign anything containing blank lines or spaces. Scammers can add information later without your knowledge or approval

Ø  If you do not speak English, use your own translator. Don't depend on someone who is provided by the "rescuer"

Ø  Don't fall for promises that are often used to lure homeowners into scams. For example:

§  Claims to save your credit rating

§  Promises of instant cash

§  Guarantees that a buyer will be found within a certain number of days

§  Help in filing for bankruptcy to "stop the foreclosure"

§  Offers of free rent or gifts