Don't Let Yourself Be Victimized by Criminals
If you are overwhelmed by debt, and in danger of losing your home to foreclosure, you may be tempted to get help from some of the many strangers who will call or write, offering to help you avoid foreclosure.
According to the US Government Accountability Office (also called the GAO), foreclosure rates have been increasing significantly over the past few years. In 2009, the foreclosure rate was at the highest level in 29 years. They also reported that, according to the Mortgage Bankers Association, that during the first quarter of 2010 "the number of home loans with payments more than 60 days past due, and therefore potentially facing foreclosure, is 2.7 million." Even when the number of people with loans in default declines, there will always be some people facing this problem. If you are one of them, you do not want to be victimized again by a scam.
Unfortunately, many of these distressed borrowers are going to be hit with additional losses because of foreclosure rescue scams. There appears to be several types of these scams: advance-fee loan modification schemes, sales-leaseback schemes, and forensic mortgage loan audit scams.
The Advance-Fee Loan Modification Scam
In this scam, a "helpful" salesperson will contact someone who is behind on their mortgage payments. They can easily obtain these names, because it is public information. They will tell the distressed homeowners that they can negotiate a deal with your mortgage lender to reduce the amount of principal that you owe on your house, reduce your interest rate, reduce your payments, or all of these things. Often they offer a money-back guarantee. They charge the homeowner a fee to "assist" them … often around $3000. Then, they do little or nothing after that. They keep the money and, when the homeowner realizes what is happening and tries to get a refund, they refuse. Sometimes, they even close up their business, change its name, and move somewhere else, starting the scam up again in a new location.
The Sales-Leaseback Scheme
In this scam, another type of "helpful" salesperson will contact homeowners who are behind on their payments and offer to "temporarily" assist them by taking over the mortgage payments and letting the owners pay rent to stay in the house. Supposedly, this will give the distressed homeowner time to solve their financial problems. However, there is a catch. In order to take over your payments, you must transfer the deed to your property to them! Although they promise they will transfer it back, once you are back on your feet, they often take more loans out on the property or even sell it to someone else! Fighting to get your home returned can be a lengthy and costly problem.
Forensic Mortgage Loan Audit Scams
In a forensic mortgage loan audit, the scammer offers to read all your original loan documents to find any errors or violations that will help you avoid foreclosure. Sometimes they even assure prospective clients that they can get your mortgage canceled. However, according to the Federal Trade Commission, there is little evidence that this is very successful. Of course, these scammers will charge an up-front fee for the time they will spend "examining" your mortgage documents. The homeowner is out the fee, and receives no real help.
How to Spot the Mortgage Rescue Scammers
According to the Federal Trade Commission, it is probably a scam if the "helpful" salesperson or business does these things:
Guarantees that they can stop the foreclosure
Tells you NOT to contact your lender, lawyer or a credit counseling service
Collects an up front fee
Accepts only cashier's checks or wire transfers
Asks you to transfer your property to them
Tells you to make your mortgage payments to them, rather than the lender
Suggests you lease your home back from them
Offers to fill all the paperwork out for you
Pressures you to sign papers you haven't had time to read
If you are contacted by someone you think may be a scammer, contact your lender, the Better Business Bureau or the Attorney General's Office in your state.
If you are going through a foreclosure, you have enough problems without being the victim of a scam, as well.
To read more about fraud and crime, you might also be interested in the following articles:
Statistics and information about mortgage rescue fraud from FTC.gov
Graphic art from photoxpress.com
Know Your Rights - Don't Let the Banks Foreclose Illegally
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