What Foreclosure Scams Are and How to Avoid them

“What are some foreclosure scams and how can I avoid them?”

Losing your home can be a terrifying prospect. Unfortunately, there are plenty of scammers and unscrupulous businesses who prey on people in financial distress. Some of these companies call themselves a foreclosure rescue company or a foreclosure assistance firm who claim they can help you save your home. Some of these scammers are even so bold as to offer a money-back guarantee. The sad truth is, that most of these foreclosure fraudsters take your money, they leave you much worse than you were before.

Fraudulent foreclosure “rescue” companies will bend the truth and in some cases outright lie to you to sell services that promise you relief and then fail to deliver. The foreclosure scammer’s goal is to make a quick buck through fees or mortgage payments they collect from you, but do not use with the lender to improve your situation. Sometimes, they will deceive you into transferring ownership of your property.

You need to be very cautious when approached by any person or company that wants to help you avoid foreclosure or help you out of foreclosure. Here are some common types of scams run by the fraudulent foreclosure rescue companies:

Phony Counseling or Phantom Help

The scam artist tells you that he can negotiate a deal with your lender to save your house, but wants you to pay a fee upfront. Sometimes you are told not to contact your lender, a lawyer, or a credit counselor, and to let the scam artist handle all the details. After you pay the fee, the scammer disappears with your money. In some cases, the scammer will even have you make all your mortgage payments directly to him while he negotiates with the lender. The scammer will stick around for a few months collecting your payments and then disappear.

Bait-and-Switch

The scammer brings you documents that you believe will give you a new loan to make your existing mortgage current. Unfortunately, the scam is that you’ve just signed documents that surrender the title of your house to the scam artist in exchange for a “rescue” loan.

Rent-to-Buy Scheme

The scammer convinces you to surrender the title to your home as part of a deal that allows you to remain in your home as a renter. The false promise is that you will be able to buy it back during the next few years. Sometimes, part of the story is that a borrower with a better credit rating can secure new financing (that you can not) and prevent the loss of the home. The scam here is that the terms of these deals usually are so burdensome that buying back your home becomes impossible. You end up losing your home, and the scam artist walks off with all or most of your home’s equity.

Equity Skimming

The scam artist will offer to find a buyer for your home, but only if you sign over the deed and move out. The scam is that the scam artist promises to pay you a portion of the profit when the home sells, but once you transfer the deed, the scam artist simply rents out the home and pockets the proceeds. The scammer doesn’t pay the mortgage, so 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.

What are the red flags that you should watch for?

If you’re looking for foreclosure prevention help, avoid any business or individual that:

  • guarantees to stop the foreclosure process – no matter what your circumstances
  • 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 them, rather than your lender
  • tells you to transfer your property deed or title to them
  • 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.

To learn more about mortgages and other credit-related issues, visit www.ftc.gov/credit. If you feel you have been scammed contact your local district attorney, state attorney general’s office or the federal trade commission at 1-877-FTC-HELP (1-877-382-4357).

There are also new Wisconsin statutes that deal with foreclosure scammers. If you feel like you have been a victim of a foreclosure rescue scam, please contact Maxwell Attorneys LLC today at 414-727-0123 for an appointment to discuss your legal options.