Scammers and con-artists tend to make a living by taking advantage of people who are vulnerable. So it's no surprise that with the number of people facing foreclosure, that we are seeing more and more scams that promise to rescue you from foreclosure.
Now this doesn't mean that every person or company that offers to help you avoid foreclosure is running a scam, because there are many legitimate consumer financial counseling agencies out there that can help you work with your lender. You just have to be careful when trying to distinguish between the two. If someone offers to help negotiate a loan modification between you and your lender, or work to stop or delay a foreclosure for a fee, you will want to carefully check his or her credentials and watch out for the warning signs of a scam. In most cases, the immediate red flag to look for is whether or not they are requiring a substantial up front fee.
Common scams:
Foreclosure "rescue" -
This is where someone will offer to act as an intermediary between you and your lender to negotiate a modification or repayment plan. In many cases they will tell you that you will need to make your payments to them directly, and they will then forward your payments to your lender. They may also require you to pay up-front fees before they begin to help you.
Although many legitimate agencies will require some upfront processing fees, they typically are not substantial amounts. It should be an immediate red flag if someone is asking you to pay an excessive upfront non-refundable fee before they deliver any results, you should really question their service. You should also never be required to make your mortgage payments to any one other than your lender/servicer.
False "government" modification programs -
You may be approached by someone stating that they are affiliated a government program. In many cases, their company/organization may have a name that closely resembles the name of one of them many government programs in order to appear legitimate, when in fact they may not be. This tactic is designed to get you to put your guard down, at which point they will typically begin to tell you there are certain up front fees required to get you into these government programs.
There are many different government programs out there that are designed to help offer you and your lender a solution to your problem, and alternatives to foreclosure. However, you do not have to pay to benefit from any of these government programs.
Lease option and illegal flipping -
In this particular scam, you are asked to transfer the title of your home over to the person/company offering to help you. They will tell you that after you transfer ownership of the property, they will be able to obtain much better financing then you currently have, or would be able to obtain for yourself. After which, they will continue to allow you to live in the home as a renter for the new lower amount, and eventually allow you to buy the property back from you. In reality, they may just be pocketing the payments you make in rent, until ultimately your lender forecloses on you.
In some cases, they will tell you that after you transfer ownership, they will be able to negotiate a low settlement with your lender, and then be able to turn around a find a person to buy the property over this settlement amount, and thus taking the difference as their fee. This second instance is typically an illegal practice, and you could possibly find yourself in a situation where you are accused of participating in loan fraud.
Precautionary steps to avoid scams
You always want to proceed with caution when dealing with anyone other then you lender helping you to modify your loan of avoids foreclosure. Remember that although using such a 3rd party may make the process easier for you, it is not a requirement. You do not need to use a third party to work with your lender.
To ensure you are not being taken advantage of, you will want to contact you lender or service first. Get in contact with someone in the loss mitigation department to find out what option are available to you. If after learning of you options you decide to use an outside party to help you with the long and confusing process, you should still keep in contact with your lender or servicer to ensure the other party is consistently working with your lender, and hasn't just dropped off of the face of the earth.
If you are able to continue making your mortgage payment, you will want to make sure you are making your payments directly to your lender or mortgage servicer. There should be no reason for you to make your payment through an outside party/company. (There may be an exception if you are going through a bankruptcy)
Avoid paying up-front fees. With the exception of small consultation fees to a legitimate housing counselor, you should not have to pay any substantial fees to anyone before receiving any service/results.
Read through everything you sign and keep copies of them. You never want to rely on oral explanation of a document you are signing. You also never want to sign a document with blank spaces to be filled in at a later date, or a document that contains false statements or errors. And you should always consider seeking advice from a lawyer that you choose.
Never sign over the deed/title to your home without consulting an attorney of your choice.
Remember that only written agreements are binding. It is very hard to prove a promise that wasn't put into writing. Make sure that the person who is helping you has spelled out in writing exactly what they have agreed to do.
Help protect other. If you encounter anyone you suspect of suspicious activity, you should report them to the relevant federal agencies.
Should you have any questions or need further information, please don't hesitate to contact me, (775) 220-1630
Or visit my website: sellinghomesinreno.com sellinghomesinreno.com
Joshua Talayka
NAR designated: Short Sale & Foreclosure Resource
Chase International
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