Foreclosure Scam

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Please read this article: scary

The rapid rise in home foreclosures has spawned a wave of 'rescue' scams that prey on vulnerable homeowners. Here's how to avoid becoming a victim.
How it Works
The pitch
Foreclosure rescue firms use a variety of tactics to find homeowners in distress: Some sift through public foreclosure notices in newspapers and on the Internet or through public files at local government offices, and then send personalized letters to homeowners.

Others take a broader approach through ads on the Internet, on television or in the newspaper, posters on telephone poles, median strips and at bus stops, or flyers or business cards at your front door.

The scam artists use simple messages and broad promises, like: "Stop Foreclosure Now!" or "We can save your home!" A legitimate housing counselor will explain the hurdles in stopping a foreclosure and the risk that it may not be possible.

The claims
"We guarantee to stop your foreclosure."

No one can guarantee to stop a foreclosure except the lender.

"We have special relationships within many banks that can speed up case approvals."

Scammers offering to contact lenders charge a fee for making a call any homeonwer can make for free. In most cases, lenders won't negotiate with a third party other than a homeowner's attorney or a HUD-certified credit counselor acting on behalf of a homeowner.

"We stop foreclosures every day. Our team of professionals can stop yours this week!"

Preventing a foreclosure, especially once the process has begun, is a lengthy, complex procedure that involves negotiations with a lender over a repayment plan or modification of the original loan terms.

Red flags
No legitimate housing counselor will:

• Guarantee to stop a foreclosure
• Tell you not to contact your lender or lawyer
• Collect a fee before providing you with services
• Ask for payment only by cashier’s check or wire transfer
• Encourage you to lease your home and buy it back over time
• Collect mortgage payments from you directly
• Tell you to transfer your property deed or title
• Offer to buy your house for cash
• Offer to fill out paperwork without explaining it in detail
• Pressure you to sign paperwork you haven’t had a chance to read thoroughly or that you don’t understand.

The Scams
Phony counseling
The scammer offers to negotiate a deal with your lender to save your house in exchange for an upfront fee, often equal to one month's mortgage payment.

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 variation, the scammer may collect several months of payments before disappearing.

Bait and switch
The scammer offers to arrange a new loan to make a victim's existing mortgage current.

When the homeowner signs the "new loan," the scammer includes documents that turn over the title of the house to the scam artist. In some cases, the scammer uses the title to defraud a new lender by taking out a second loan on the property and pocketing the proceeds.

Victims of this scam often don't learn they've been cheated until they get an eviction notice.


Source: Federal Trade Commission, Dept. of Housing and Urban Development