Beware Foreclosure Scams
The worst has happened: you’ve gotten a foreclosure notice from your lender. Maybe you bit off more than you could chew when you bought the house. Maybe unexpected catastrophic medical bills ate up your savings and credit. Maybe you lost your job. Whatever the case, you’re now facing foreclosure.
You’re desperate. You don’t know where to turn. You don’t know what to do. But you see a flyer about a company that claims to be able to stop the foreclosure. Or you receive an email from a firm that “specializes” in helping foreclosure victims. Or a friend of a friend recommends you get in touch with this organization that can magically get you out of trouble. Do you see the red flags? They’re everywhere.
Like many scams out there, foreclosure scams rely on the desperation and hopelessness of their prey. If you’re facing foreclosure, here are signs to be wary of. Avoid organizations that:
l Contacts you instead of you contacting them. You should immediately be suspicious, because scammers research public records to find delinquent mortgage holders. If someone calls you offering to help stave off foreclosure, hang up. Don’t listen to their spiel, because they know how to play upon your desperation and fear. They know what you want to hear.
l Advises you against getting in touch with your lender or an attorney, telling you that these entities don’t have your best interests at heart. They’ll tell you that getting in touch with your lender will just make the situation worse. They’ll say that they have a special relationship with your lender and that they’ll act as your advocate, taking care of all the details. Again, hang up.
l Plays upon your ethnicity, religious affiliation or age, saying they “specialize” in that area. They build trust through what’s known as “affinity marketing.” You’re supposed to trust them because they’re “just like you.” They may even try to make you feel guilty if you resist their advances.
l Requires that you sign a “Quit Claim Deed” or other document that transfers the ownership of your home to them.
l Has numerous complaints against them with the Better Business Bureau or Internet watchdog sites.
l Requires an up-front payment without any contract or guarantee of success in halting foreclosure.
l Doesn’t put their promises in writing.
Here are some clever scams that people fall for every day. These organizations may:
l Require you to pay an up front fee and that you sign your house over to a third party. They tell you that the foreclosure will go against the third party instead of you, so you’ll be free to buy another house with no ding on your credit. The upshot? Now the company owns your house, will bring the payments current, and there will be a foreclosure against you, not them. Because a foreclosure is recorded against the name on the lender’s promissory note—not the title holder! So now they have your house and a good chunk of your change. And you have nothing.
l Offers to buy the property with the intention of renting-to-own it back to you. Then the terms they come up with are impossible to meet and you lose possession of your house.
l Charge huge fees to file paperwork and make phone calls that you can do yourself. You’ll lose the house anyway, be out a big chunk of change and have no recourse because they did what they said they’d do—file paperwork and make phone calls. They never said they’d stop the foreclosure.
l Give you documents to sign to “bring the mortgage current”—but what you’ve actually done is sign the house over to them. This is a particular favorite for those scammers who target the elderly.
Bottom line: CONTACT YOUR LENDER. They want to help you. They don’t want you to lose your house, no matter what these scammers tell you.