Foreclosure Rescue Scams Mounting Along with Foreclosure Rates
Homeowners desperate to stop foreclosure may put their trust in the wrong people, and in doing so may lose more than they’d ever expected. Several states have taken action against predatory “mortgage rescue” companies and individuals claiming to offer services to stop foreclosure over the past two years.
- Illinois regulators shut down a mortgage rescue scam in which investors would persuade homeowners to sign over the deeds to their homes and any earned equity. Homeowners were told that the investors would pay off the delinquency, lease the property back to the homeowner, and eventually sell it back to them.
- In North Carolina, a company searched courthouse records for people facing foreclosure, then sent direct mail solicitations claiming special expertise and a high rate of success in stopping foreclosure. Homeowners paid a fee up front, usually one month’s mortgage payment, and then many never heard from the company again. In addition to losing the money paid to the company, many of these homeowners lost the opportunity to negotiate with their mortgage lenders or seek other solutions because the company instructed homeowners to have no direct contact with their lenders.
- Three Washington state businesses allegedly targeted consumers who had fallen behind on their property taxes, taking title to their homes in return for very small payments. The companies then let the properties go to tax sales and collected for themselves the surplus equity that would otherwise have gone to the homeowners.
- The Texas Attorney General won a restraining order and order freezing assets against a woman who allegedly told homeowners that she would negotiate with their mortgage companies to resolve past-due payments and stop foreclosure. Bobbie Heckard then reportedly gave homeowners forms she said would allow her to negotiate on their behalves, but which actually deeded their property over to her.
Although these are some of the most common foreclosure rescue scams at the moment, there are as many means of deception as there are people in difficult circumstances. If you’re looking to stop foreclosure, don’t let desperation push you into uninformed or hasty decisions. In particular, beware of any company that instructs you not to talk to your mortgage lender, or who makes promises (such as, “We’ll sell the house back to you at a later date.”) that aren’t part of a written agreement. Make sure that you read and understand everything that you sign, and if you don’t understand, have someone you trust or a local attorney review the document before you sign. If the person or company you’re dealing with does not want you to have the paperwork reviewed by an outside party or discourages talking to an attorney, that should be a red flag that they may have something to hide.
There are a variety of options available to stop foreclosure, depending upon the specifics of your situation. For people with significant equity in their homes who are not more than 90 days past due, refinancing is often a viable alternative to stop foreclosure. For those who can’t refinance, a debt workout plan may be the answer. And even if negotiations and refinancing don’t work out for a homeowner, Chapter 13 bankruptcy may stop foreclosure.
Whatever your specific circumstances, do your homework. Make sure that you’re dealing with a reputable company or attorney, that you have read and understood everything that you sign, and that you aren’t relying on verbal promises that may not be enforceable.