Tuesday, November 9, 2010

Foreclosure Scams Are Abundant

Beware if it seems too good to be true…

The US Government Accountability Office (GAO) issued a report in July 2010 that states: "The current foreclosure crisis has provided persons who may perpetrate mortgage foreclosure rescue and loan modification schemes with unprecedented opportunities to profit from homeowners desperate to save their homes.”

The report states that there are two main types of foreclosure rescue and loan modification scams: advance-fee loan modification schemes and sales-leaseback schemes. Advance-fee schemes are the most prevalent. With an advance-fee scheme, the victim gets charged a fee in advance to supposedly negotiate a deal with your mortgage lender. Sometimes they will offer a money-back guarantee. Typically the result is that they take your money (the average being around $3,000), provide little or no service, and then decline to return the fee.

In a sales-leaseback scheme, the scammer convinces you to turn over your deed to them by offering to take over your payments while allowing you to pay rent while you get your affairs in order. They agree to sell the property back to you once your finances improve. This of course never happens. Frequently they’ll even take out another loan on the home or sell it out from under you.

The Federal Trade Commission tells us of a new angle on the advance-fee scam that came to light this year, a "forensic mortgage loan audit." The scammer claims they will find regulatory violations in your mortgage that will assist in avoiding foreclosure or even canceling your loan. There's no proof that anyone has ever modified their loan in this manner.

The FTC has issued some warning signs that at-risk homeowners should beware of when looking for foreclosure help. You should avoid any business 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 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 that you don’t understand.

As always, if you have questions or concerns on these issues, don’t hesitate to contact me. I’m happy to help.