Things happen. Unemployment, debt, divorce, medical bills— you name it. It only takes to miss a few mortgage payments, and before you know it, your house is for sale.
Anybody can fall into such a situation, which is why many law agencies offer help to prevent foreclosure. These law firms may be able to make it easier to make payments, but in the end only the real estate owner can fix it completely.
As homeowners fall behind on their mortgage payments and face the prospect of foreclosure, con artists are also taking advantage of their mortgage crisis. Some of those struggling with housing payments have sub-prime, high-cost mortgage loans, which compounds the problem. And all the while credit slowly tightens, putting additional pressure on those in the squeeze.
How do you meet those payments after having missed so many? What if your interest is growing faster than your income? How to not stress with the ridiculous work it takes?
Most people wish to find a quick-fix for it. If someone promises to solve your problems overnight, it’s too tempting to say Yes. That’s how you fall into foreclosure scams, losing even more money and making the repayment impossible.
- How Do Foreclosure Scams Work?
- Red Flags Of Foreclosure Fraud
- Variations Of Foreclosure Fraud
- How To Prevent Foreclosure Scams
- Already in the Middle of a Foreclosure Fraud?
- Foreclosure Scams: Wrapping Up
How Do Foreclosure Scams Work?
In a foreclosure scam, a person disguises as a rescuer that comes to save your home. They misdirect the victim, who either loses their money or property.
Worst of all? A scammer can prevent you from getting real help. He can use your signature to manipulate your property and take away control. The problem becomes your responsibility.
- They find victims in a foreclosure process
- They make an offer you can’t refuse
- They set their conditions to prevent the lender from interfering
- They mislead the victim to give them the property and walk away
Where Does It All Begin?
Once the foreclosure process begins, the pre-foreclosed home appears listed on a website anyone can visit. Fraudulent agencies visit them to find the next victim. As soon as they find out your situation, you start getting emails, phone calls, and letters from them.
The offer? Exactly what you want to hear: stop the process no matter the obstacles. If the victim fails to detect the scam, the fraudster can get their confidence and trick them in a dozen different ways. By the time you notice, it may be too late to stop the scam.
Before you’re even aware of it, these scam artists will take the money you have paid them for their “services”. The result? You don’t stop the foreclosure process: you speed it up. In addition to this they will acquire your home for a fraction of what it would have brought at a sale.
You as a consumer must not make any rushed judgments, even though time is probably not on your side in this situation. Think twice before embarking on a plan and think very long and hard before signing anything.
Red Flags Of Foreclosure Fraud
Companies dealing with house payments assistance can help you prevent foreclosure. How do you tell the right agencies from the fraudulent firms?
One sure flag is the way they offer their help. An honest agency gives you information, options, and autonomy. You can stop foreclosure even without help— but a scammer wants to make you believe the contrary.
How to find the best companies? You learn what honest agencies would never do:
Have Honest Communication
When you miss the payment, the lender can start a foreclosure process to compensate for the losses. Constant, honest communication leads to the best solution.
Legitimate companies will sit down with a homeowner and collect documentation. They will put together a package and present it to your lender.
The scammer, on the other hand, keeps everyone uninformed.
“If you want to stop foreclosure, it’s vital to keep the agreement private.”
The lender never hears about the con man, so they will blame you when anything goes wrong.
More Promises Than Facts
Be wary of “affinity marketing” techniques with the idea that people like you are on your side and protecting you from those who don’t have your best interests at heart.
Agencies have to back up their promises with documents and evidence, not words. When the deal starts, they can’t guarantee they will do what they said.
Obvious? Yes. But when you’re about to lose your home, emotions lead to irrational decisions. We give the scammer more confidence than they deserve because of their “rescue promise.”
Good decisions are those you make rapidly without overthinking it. Good for whom? Exactly.
Scammers use a sense of urgency to discourage you from making questions and thinking with caution.
“Knowing your critical situation, you should sign these papers today.”
They give you these huge piles of papers to sign, all of them with complex, abstract terms. Don’t you understand some conditions? The agent lowers their importance, telling you to move forward.
Avoid writing your signature on blank documents. A scammer can copy and paste it on other documents you didn’ agree to sign. Some documents will be printed on purpose to make you sign behind.
Beware of any home-sale contract in which you are not formally released from liability for your mortgage. Make sure you know the rights you are giving up and that you agree to give them up.
Watch out for promises that lure homeowners into deals as well. These offers may include promises to “save your credit” or maybe the company promises to “find a buyer within seven days.”
Yet, people choose it because that’s what they want to hear. They lose their equity and overpay no matter what they choose. Once the scammer owns the property, you’re at risk of countless real estate scams.
Variations Of Foreclosure Fraud
You don’t just want to stop foreclosure. You want to live without rent problems and without headaches.
Be clear with your terms, because scam artists can actually stop foreclosure at a price you didn’t agree with. Before hearing their pleasant promises, ask: is this person qualified to help me?
What happens when the wrong person solves the problem? They now have control over your property and can do whatever they want with you. Did we mention how hard is it to prove anyone the scam?
Bailout (Equity Skimming)
The lender has no interest in buying your home. The foreclosure started on their request. Once someone buys it, they can evict you from the property.
A scammer reaches out. If you pay him upfront, he will buy the property and rent it to you. You avoid the foreclosure.
In this long-term deal, the new fraudulent owner lets you live there until you can buy your home. You solved the foreclosure problem, but now the scammer has control. You pay for overpriced rent, get evicted from the house, worsen your credit score, and lose your equity.
This “rescuer” makes you pay far more than what you’d have spent with the original contract. If you can’t stop foreclosure, consider selling your home. You could save more money than trying to keep it.
Sharks smell blood, scammers smell money. A “rescuer” emerges out of nowhere and offers to relieve you of your headaches and finance your property.
How do you know they will do what they promised? How can you undo the changes if they don’t deliver? Simple questions like these can cost you thousands in advance-fee scams. They may charge outrageous fees for light-duty phone calls or paperwork that the homeowner could easily do himself.
You pay thinking they are solving the problem when they’re only talking about it. All these phone calls and signed papers go nowhere.
Although it may not cost much money, it wastes a lot of your time. You trusted a stranger to solve the problem, which stopped you from finding the real professionals. Every day spent makes it harder to stop foreclosure.
Fractional Interest Transfer
Typically, a partial interest in the property held by a homeowner facing foreclosure is transferred to a real or fictional entity already in bankruptcy. Because the property interest is then held by a bankruptcy debtor, the original owner’s creditor cannot foreclose until the bankruptcy court lifts the automatic stay.
Needless to say, foreclosure is only delayed and not lifted. In the meantime the con artists has robbed you with some fictional fees and left the building.
The scam perpetrator contacts the homeowner, advertising “mortgage assistance” or “foreclosure counseling”. He will promise to work out the home owner’s problems with the mortgage or to obtain refinancing for an up-front fee typically in the upper hundred dollars range.
The con artist will then direct the homeowner to “fill out some forms,” including a blank bankruptcy petition, or will collect the information needed to complete a petition later. The perpetrator subsequently files a bankruptcy petition in the home owner’s name, after filling in the bankruptcy papers signed by the homeowner or forging your signature.
The bankruptcy petition invokes the automatic stay, foreclosure is postponed, and you the homeowner, will stop receiving letters and collection calls. The scammer will not tell the homeowner about the bankruptcy petition, instead he will try to convince the homeowner that foreclosure activity has ceased because mortgage problems have been worked out.
The perpetrator will tell the homeowner that he might receive a notice from the court, which should be ignored. Or you may be told that the con artist has gone to court on your behalf. No one appears at the court, the case is dismissed, the foreclosure goes forward, and the home is lost.
Bait And Switch
In this worst-case scenario, they will have transferred your title into a trust that then enables them to rent or “resell” your property to equally hoodwinked buyers while, to your surprise, you remain legally obligated to make the mortgage payments!
They place ownership of the property into a trust in the owner’s name in order to avoid the “due-on-sale” clause in most mortgage contracts. Then they transfer ownership through the trust to themselves or to a front operation.
In these instances, the mortgage company is unaware that anything is amiss. The homeowner, however, is frequently left on the hook to pay the mortgage on a house he no longer owns.
How To Prevent Foreclosure Scams
Stopping foreclosure may be hard when you take action too late. Foreclosure is a complex process that usually takes several months. Although this is a stressful situation, the debtor might have enough time to find a solution, because of this lengthy process.
In some instances, homeowners never even realize they were defrauded. The best way to avoid a foreclosure scam is usually to either pay off the missed months or sell the property.
The last thing you want is to lose money because you gave it away to a scammer. Here are some guidelines to complete this process without putting your finances at risk.
Talk to the Lender
You missed some mortgage payments, so the lender started the foreclosure process. They are the #1 people you should ask for help.
Why? Lenders want to get returns from their property. They aren’t interested in buying it. If they can’t make money renting, at least they’ll earn something selling it.
Many alternatives can compensate your lender aside from foreclosure. For example, you can prepare a repayment plan, increase your rent price temporarily, and recover the losses.
Negotiation can prevent foreclosure.
Prioritize Payments With Your Savings
The closest person to help you is your lender, not an agency that came out of the blue. You may not have the funds to solve the problem right now. However, financial responsibility will show your lender that you’re serious, which makes them more likely to help you.
Look at the costs you can cut, such as cable TV, Internet subscriptions, dining out, and so on. To boost your savings, sign up for some cash-back reward programs and track your expenses.
Apply for some hard money loans, and spend all your money on your house to avoid foreclosure. Scammers will try to sell you consulting, negotiation services, and other stuff you won’t need. Don’t let them fool you and stick to the plan with your lender.
Trust but Verify
You’re already losing a lot. Do not pay upfront for any service you haven’t got yet. Instead, pay for results and you’ll avoid confidence tricks such as advance-fee scams. Do not sign any contract without consulting with your lender first.
The agent may want you to sign a white paper. If there’s no other option, take the original papers or make a copy of every document you sign. Now, if the scammer forges your signature on some other contract, you can prove that you didn’t.
Work With Professionals
Not all foreclosure agencies are scams. But if you’re going to receive help, at least work with accredited experts.
A fraudulent agent may promise the conditions you want to hear and not deliver later. A licensed attorney, however, is bound to work on your best interests by law.
Lastly, the expert will make the case approachable, no matter how complex it is to understand. A scammer only wants to rush through the paperwork, whether you understand the consequences or not.
Already in the Middle of a Foreclosure Fraud?
Unfortunately, help is becoming harder to find the deeper you are in this situation. Even if someone in foreclosure could afford to hire an attorney, few lawyers are inclined to take cases against scammers because the prospect of ever collecting a court award is slim. Here are some guidelines:
- Make sure that you really are in foreclosure. If you are behind in payments, you will receive what is called a deficiency notice. These letters notify you of your delinquency and give you a chance to resolve the debt. If you receive a Notice of Trustee’s Sale, or similar document, you are in foreclosure.
- Learn the laws regarding foreclosure for your state. It is important to know how much time you have to resolve the issue.
- Be careful when choosing a counselor and pay attention to the certification requirement recommended above. Some counselors are scammers in their own right and will overcharge for services that they not even provide. It’s really very easy to tell a scammer from a legitimate counselor: You should not have to pay for legitimate housing counseling. Make sure that the counselor is certified by the Department of Housing and Urban Development (for United States).
- Do not bury your head in the sand. The problem will not go away, and will only get worse if you ignore it.
- If you do not speak the national language of the country where your property is, never use a “rescuers” translation services. Instead, insist on using your own translator.
- Contrary to what the scammers would have you believe, contact your mortgage company first. There are many remedies available, including renegotiating the terms of your mortgage, that can save your home or failing that, allow you to walk away with most of your equity.
- Don’t sign a home-sale contract where you are not released from your existing mortgage.
- If you have received a foreclosure notice, or even if you feel you won’t be able to make your mortgage payments, contact your lender immediately. You may be able to negotiate your payment schedule. Lenders do not want that you foreclose because it may be expensive for them.
- Bankruptcy does not stop foreclosure. It puts a hold on foreclosure which can allow you time to reorganize your finances. Every area has reputable attorneys who handle bankruptcies. Spend the time to find one and spend the time to know what you have to do and when. Mistakes can cause things to get very bad, very fast.
- Every time you refinance, unless you are paying fees out of pocket, your loan balance is going up which is using up your equity. Lenders can make a lot of money churning loans, you need to consider total loan amounts also, not just the monthly payments. Try to solve the problem, not just extend the time frame.
- If you can’t refinance, renegotiate or sell quickly, it may make sense to look at filing for bankruptcy. It may be a more reasonable option instead of carrying on and maintaining a debt that you are obligated to pay, but can not afford to. It is not always possible to resolve delinquent mortgage payments. Selling a home and receiving the equity is much preferred to having your home stolen by thieves.
Foreclosure Scams: Wrapping Up
At the end of the day, what many people crave most for is the coziness of their homes and the company of a family. It may take years to build your dream home, but it only takes a few missed mortgage payments to take away your dream.
Many foreclosures go either completely unexposed or unpunished because homeowners don’t even realize what happened, can’t afford to hire attorneys or because state regulators lack investigative staff or the authority to act.
If you believe that you are the victim of criminal activity, you should contact your local law enforcement agency and contact a consumer protection lawyer. An attorney can assist you as you navigate your way through hearings with enforcement agencies, eviction hearings and in lawsuits.
You may be better off searching locally for a consumer protection attorney, however you can also visit the National Association of Consumer Advocates.
Last thing to remember is that this setback won’t last forever. Stay positive until the end. You could even keep your credit score and equity if you do it right.
The take-away? Don’t wait until it’s too late to solve the problem.