Foreclosure Sams

Common Types of Loan Modification & Foreclosure 'Rescue' Scams

Common Types of Loan Modification & Foreclosure 'Rescue' Scams

Foreclosure rescue scams have been spreading across the nation for the past couple years at an alarming rate. For the average homeowner it is crucial watch out for these scams so you can protect yourself and your home.

Potential victims to these scams are easy to locate because mortgage lenders publish public notices before foreclosing on a property.
Types of Scams to watch out for inclue:

Phony Counseling or Phantom Help -- The “rescuer” tells the borrower that he can negotiate a deal with the servicer to save the house if the borrower pays a fee first.  Once the fee is paid, the rescuer takes off with the money and provides no assistance.

Lease or Buy-Back -- Homeowners are deceived into signing over the deed to their home to a scam artist who tells them they will be able to remain in the house as a renter and eventually buy it back.  Usually, the terms of this scheme are so demanding that the buy-back becomes impossible, the homeowner gets evicted and the “rescuer” walks off with most or all of the equity.

Bait and Switch -- Homeowners believe they are signing documents for a new loan to make the mortgage current, but sign away their home and are left holding the mortgage on a home they no longer own.

Refinance Fraud -- Beware of people posing as mortgage brokers or lenders and offering to refinance your loan so you can afford the payments.  Con artists may trick you into signing over the ownership of your home by saying that you are signing documents for a new loan. 

Bankruptcy Foreclosure -- There are several scam attempts to abuse the bankruptcy laws.  The bankruptcy process can be complicated and expensive and the results can have a negative effect on your credit for years to come. For example, the “rescuer” may promise to negotiate with the lender or get a refinance on your behalf for an upfront fee.  Instead, the scam artist takes the fee and files a bankruptcy case in your name—sometimes without your knowledge. 

Equity Stripping -- A buyer purchases the home for the amount of the late payments and flips the home for a quick profit.

Red Flags 

If you are looking for foreclosure prevention help, beware of any business that:

  • guarantees to stop the foreclosure process – no matter what your circumstances

  • offers to make your loan more affordable and help you avoid foreclosure

  • 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

How to Spot a Scam -- 6 Things You Should Know