Foreclosure rescue and loan modification scams are on the rise. They target and exploit homeowners with false promises to reduce or even eliminate mortgage payments, pay off their credit or trick homeowners into signing their deeds. Often, scammers charge additional fees in violation of existing laws.
What is the most common form of rescue scam?
Loan modification scams
Scammers, an individual, company and sometimes even a law firm, make exaggerated claims that they can get a homeowner a loan modification with a guaranteed low interest rate. Typically, the scammer will demand a substantial upfront fee or, worse, set up an automatic withdrawal
from the homeowner’s bank account. Scammers often collect loan documents from the homeowner and may even promise to appear in court on the homeowner’s behalf. However, in most cases the scammer will do neither. These scams not only cost homeowners thousands of dollars, but actually harm the homeowner
Short sale scams
A legal short sale is an option for homeowners to avoid further liability for their mortgage debt. This requires the homeowner to negotiate with the bank with the help of a reputable and licensed real estate broker and an attorney to get approval for the sale of the mortgaged property. In contrast, scammers will induce or trick a homeowner into signing over their home with false claims to resolve their foreclosure action or mortgage debt. Unfortunately, homeowners subsequently learn that the scammer did not accept or satisfy the mortgage, leaving the homeowner responsible for the unpaid mortgage loan. Homeowners are strongly advised to never sign any documents without reading them and, preferably, consult with an attorney.
Other foreclosure rescue scams
In forensic loan audits, the scammer claims to have an “auditor” review loan documents for violations of federal and state laws in exchange for a substantial fee, falsely claiming that the homeowner’s mortgage can be foreclosed.
Document theft and equity skimming scams
The scammer promises the homeowner that they can avoid foreclosure by temporarily signing the contract (transferring ownership) to a third party, claiming that “straw buyers” with better credit can buy the home back within a year. Often the scammer uses the straw buyer to get a new mortgage that is much more than what is owed and pocket the equity. In some cases homeowners are tricked into believing they are refinancing and having a third party sign over the deed.
How do scammers target homeowners?
Scammers target homeowners who are public records for foreclosure filingssearch
is in foreclosure. They target neighborhoods known for their increased foreclosure activity and/or communities occupied by limited or non-English speaking homeowners.
How do rescue scammers advertise?
Scammers target homeowners through mail, radio station and television ads, the Internet, as well as door-to-door solicitations. The “leverager” promises the homeowner the services they provide, such as legal representation or loan modificationapplication
Depending on the submission.
How can I avoid rescue scams?
There are many red flags when trying to identify a rescue scam:
You should be suspicious of any company, broker or individual that claims they can guarantee you will save your home equity loans. No legitimate organization can guarantee the results.
“Requesting further payment”
Charging an upfront fee for foreclosure prevention services is almost always illegal. Many scammers begin requesting payment or withdrawing money from the homeowner’s bank account as soon as the “service” begins. Do not allow anyone—not even a law firm—to withdraw funds from your bank account.
“Getting you to sign misleading documents”
Many scammers encourage or force homeowners to sign complicated documents. You should never sign a document that you do not fully understand.
“You are advised to stop payment”
Scammers often encourage homeowners to stop making mortgage payments or stop contacting the servicer. Homeowners should never make mortgage payments to anyone other than the servicer.