Foreclosure Scams to watch out for

When you are facing foreclosure, you are vulnerable. If you are there already, you have probably been barraged with solicitations by mail to offer help. Some of these may be legitimate, but increasingly, people are getting scammed by disreputable "investors" or "brokers" whose only goal is to enrich themselves, often illegally at your expense. To avoid being a victim, get independent professional advice about your choices

How do these people find you? They get your name from public records, using services that comb records of foreclosure filings and sell mailing lists of names and addresses. They may have checked the Sheriff records. They will often call or send you letters or postcards.

What do I do to protect myself? First, if you are in financial trouble, you need to get independent qualified advice about all your options, preferably from an experienced attorney. This is usually not expensive and is always a worthwhile first step. Never assume that you have no options until you have gotten such advice. Even if a foreclosure sale is coming up, you may have important options. Secondly, get the facts you need. Ask a qualified and independent broker to give you a "Comparative Market Analysis" what your home is worth. This can be done for free or for a small but reasonable fee. We often recommend this for our clients. Third, plan.

What are some of these scams? They are always evolving, but they all offer desperate people false hope, at a price. Here are some of the recent ones:

Equity Skimming. In this scenario, a person who calls himself a buyer or a broker or mortgage assistant stops at your door and convinces you to sell your property to him (usually for less than market value) and promises to pay off your mortgage. The buyer is likely to advise you to transfer the deed of the property to him, move out of the house and stop interacting with your mortgage lender. The buyer will then rent out your property to a third party and start collecting monthly rental payments. Unfortunately, the buyer will make no effort to pay the mortgage payments, thereby allowing the lender to foreclose on your property. The skimming aspect comes into effect if you have a reasonable amount of equity in your property; the scammer will flip the property to pay off the debt and then make a profit by keeping the equity. Remember: Signing a deed over to a third party does not relieve you from your mortgage obligations.

Equity Stripping. In this scam, an unscrupulous mortgage lender will come to you with an offer to get you a loan. He or she will probably be aware of your poor financial condition. The scammer may "help" you prepare the application, with false or exaggerated income or other facts so you can get the loan. You go along, even though you might not be able to afford the monthly payments. The moment you default on your mortgage payments, the lender will rush in to foreclose your property and strip you of your home's hard-earned equity.

"Leaseback" or "Buyback" Arrangements. This is a variation in which you are allowed to "stay in your home" by selling it for much less than you could on the open market, with a promise that you can "rent" it at favorable terms, or "buy it back" later. When you get to the "closing" the terms change. By then, the Sheriff is at the door. You are offered different terms on a "take it or leave it" basis.

Phony "Debt Relief" Agencies. You may find agencies that offer to settle your debts for you or repair your credit--for an outrageous fee. People are drawn to these programs because they want to "avoid bankruptcy" or "keep their credit". But all they do is make some inexpensive phone calls and complete some paperwork, or negotiate repayment plans that are unrealistic or outside your reach. In an effort to meet these payments, you may actually make things worse Or they may organize a pre-foreclosure house sale on your behalf at "fire sale" prices, with hidden costs, terms or "kickbacks". Before going this route, have some idea what you can really afford to do, including doing your own budget to see what you can really afford, after paying for important basic needs. Better yet, see a qualified attorney and specifically ask about these alternative. Ask for detailed written contracts, and confirm that an agency is genuine., and never pay up front for foreclosure services.

Refinancing Scams. Here, you are offered a way out by loan refinancing at "lower" mortgage payments. But the hidden terms, or by last minute "bait and switch" you end up in more trouble. At first, the payments may be low because you are paying the interest only, or there is an "adjustment". Or the entire balance comes due in a "balloon" payment, which you cannot afford. The lender or his cronies are waiting to take your home away, and you have lost out.

Phony Loan Transaction. Here, you are offered a "refinancing" by signing a refinancing loan document that claims to bring your neglected loan current. However, in the fine print print, you may transfer the title of your home to someone else for a very small part of its value. Watch for prepayment penalties, balloon or interest-only payments, huge fees and immediate rate adjustments.

Identity Theft Scams. Here the scheme is to convince you to apply for a low-interest mortgage loan on the phone or Internet. To make the loan, you give the "lender" vital information about your Social Security and bank account numbers. This information is then used to "steal" your identity, with the information sold off. Of course, the "loan" is immediately accepted, after which you start faxing the documents and sending wire transfer payments to the phony company without even meeting the lender. See our page on "identity theft".

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We are attorneys providing debt relief advice and representation. We help people obtain debt relief under the Bankruptcy Code and other laws. If you need our help feel free to call us, after you have reviewed our disclosure page. The initial telephone consultation for new clients is always free, and most initial office consultations are either free or at reduced cost.

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