Guest contributor: LegalMatch.com
It’s a sad fact of life that people out for a quick buck will defraud the most desperate and vulnerable among us. With the wave of mortgage defaults and foreclosures that this and other countries have seen in the last few years, it should come as no surprise that they are scammers eager to pounce on innocent people who simply want to keep their homes.
Sadly, these scammers aren’t going away anytime soon. They get called out in the media constantly, but since they have no shame, they don’t care. The best thing a person can do to fight these scammers is to avoid falling pray to them. To that end, I’m going to discuss a few of the most common foreclosure-related scams, and how they can be avoided.
- Fake counseling: You’ll often get junk mail, or see ads on the Internet, telling you about an “exclusive seminar” that will tell you the super-secret method for preventing foreclosure. It may or may not include information that “THEY” don’t want you to know. If you just read the right book, watch the right video, or listen to the right speaker, you’ll get the secret cheat code that allows you to stop a foreclosure in its tracks. The fact is, if there were a perfect, easy way to get out of foreclosure with no negative consequences, you’d have heard about it by now. Typically, these people will sell you information that is widely available for free, or simply bombard you with more sales pitches. Also, you have no guarantee that any of the information you do receive will be useful, or even accurate.
- Rent to buy scams: In this scam, you’re told that if you hand over title to your house to a person who will pay off your mortgage, and allow you to remain in the house as a renter. You will be told that you’ll be able to buy the house back in a few years. Typically, the contracts that set up this arrangement are so complicated and burdensome that it becomes possible for the former homeowner to buy their house back. This lets the scammer walk away with full ownership of your house. Furthermore, if the new borrower (the scammer) defaults, you get evicted.
- Stopping foreclosure with bankruptcy: The scam artist asks you for an upfront fee, and promises to negotiate with your lender for a lower monthly payment, or refinance at a lower interest rate. The scammer pockets whatever money you give them, and files a bankruptcy case in your name, possibly without your knowledge. This will temporarily stop all foreclosure activities, so you may think you’re in the clear just long enough for the scammer to drop off the face of the Earth with your money, leaving you to deal with the consequences of going bankrupt.
Those 3 examples are only the most common types of scams a person in foreclosure might encounter. Fraudsters are creative, if nothing else, and the exact setup and sales pitch for these scams can vary. With that in mind, here are some red flags that should give you pause, even if an offer or advertisement doesn’t necessarily look like one of the scams discussed above:
- They demand a fee before any services are performed
- They will only accept payment by a wire transfer or cashier’s check
- They guarantee that they will be able to stop your foreclosure, regardless of your individual circumstances (no reputable attorney or mortgage counselor will guarantee a particular result)
- They advise you against contacting your lender, government authorities, a lawyer, or credit counselor
- They tell you to send your mortgage payments to them, instead of your lender
- They pressure you to sign documents without giving you a chance to read them over and clarify any terms you don’t understand
- They tell you to transfer title of your house to them
These are just a few possible red flags. One mental exercise to do when you’re considering enlisting the services of someone who claims that they can help you with your mortgage is this: ask yourself, what’s the worst that can happen if, at any point in the process, they turn out to be a fraud? Obviously, if they demand money up front, the worst than can happen is they abscond with whatever you paid them, without lifting a finger to help you. If they demand that you hand them title to your house, the worst that can happen is that you lose your house.
If you are dealing with a reputable organization, that genuinely wants to help you, chances are good that this calculus will be very different.
In the end, it’s up to individuals to be vigilante, and watch out for scams. There’s absolutely nothing wrong with telling someone you need time to think about an offer. And if they tell you that this is impossible, and that you need to make a decision immediately, they probably don’t have your best interests in mind.
John is a writer for LegalMatch.com and the LegalMatch.com law blog. The above post is for informational purposes only, and should in no way be construed as legal advice.
