Stop Home Foreclosure

Step 6: How to avoid foreclosure scams

It’s okay to get help. This is a very difficult and stressful to face on your own . But don’t let stress cloud your judgment. Foreclosure is a serious problem and there are no easy answers. Anyone who tries to tell you they have an easy solution for you is trying to take advantage of you. There are no guarantees when it comes to foreclosure relief, and anyone who makes these kinds of promises is going to profit at your expense. Be informed and avoid these common scams:

Predatory lenders

Predatory lenders make loans to people who can’t afford them, knowing the loans will likely go into default. They try to make as much money upfront as possible and still take your home in the end. It is very common for these types of companies to contact people in or close to foreclose with offers to get a second mortgage or line of credit to help you get out of your current situation. They try to panic you into high cost mortgages, making financial problems worse and increasing your risk of losing your home. Borrowing money against your house may seem like an attractive option. But your inability to pay your bills, for one reason or another, is how you got into this position. Adding more debt is a short term fix that will lead to bigger problems in the future. Beware of these signs of predatory lending:

• Up front fees

• Approval guarantees

• Guarantees you will keep your home

• Willingness to approve you without getting financial information

• Broker fees

• Unnecessary costs like pre-paid life insurance

• Unaffordable repayment terms

• Excessively high interest rates, points or fees

• Trying to get you to borrow more than you need

• Trying to get you to borrow much more than the value of your home

• Loan terms that change at the last minute

• Heavy pressure to get you to sign something you don’t understand

• Unwillingness to fully explain anything you don’t understand

• “Bargain Loans”

• “No Credit, Bad Credit, No Problem”

Equity skimming

These scam artists offer to help you get out of your current financial situation by promising to pay off your mortgage and to give you cash when they eventually sell your home. The equity skimmer will ask you to sign over the deed (or title) to your house, or they promise to assume your mortgage. The hook in this scam is that signing a deed over to someone does not necessarily alleviate your responsibility to pay your mortgage; and not all assumptions fully release you from you mortgage obligation. You will begin paying the scammer “rent” to stay in your home, even though you still owe your original lender. The scammer will not make your mortgage payments and not talk to your lender. Your lender will foreclose because they have no other options and you will lose your home. You will have also lost the “rent” payment you made.

Phony counseling agencies

You may get solicited by scammers claiming to be a counseling agency. They will make big promises about negotiating with your lender and make guarantees about results. They will require a fee to provide these services and usually that fee needs to be paid in advance. These companies will charge you up to three times your monthly mortgage payment.

There are legitimate counseling services out there, services that will negotiate with your lender and work with you. But some of these companies are charging you for the exact same things you can do yourself. If you want some help, that’s okay. But before you pay any money to any counseling service, see Step 5: Where you can go for foreclosure help to get the name and number of legitimate counseling services that are approved by the U.S. Department of Housing and Urban Development and may be available for free.

TIPS TO AVOID SCAMS:

• Don’t believe anything that sounds too good to be true

• Get all guarantees in writing

• Don’t sign anything your don’t understand

• Use only HUD approved counseling services

• Contact a local lawyer and your mortgage company before signing anything related to your house

• If you suspect a scam contact your local consumer’s affairs office, your local District Attorney’s consumer fraud unit, or the Federal Bureau of Investigation.

• Step 1: Understanding how foreclosures work
• Step 2: Slow down the home foreclosure process
• Step 3: How and why to communicate with your lender
• Step 4: Understand all of your options and home foreclosure alternatives
• Step 5: Where you can go for foreclosure help
• Step 6: How to avoid foreclosure scams
• Step 7: Get on a budget

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The information contained in this site is based on our opinions, research, and experience dealing with the foreclosure process.  It does not constitute legal advice.  If you need legal advice specific to your personal situation, please consult an attorney.