The possibility of losing your home to foreclosure can be terrifying. The reality that scam artists are preying on the desperate homeowners is equally frightening. Many so-called foreclosure rescue companies or foreclosure assistance firms claim they can help you save your home. Some are brazen enough to offer a money-back guarantee. Unfortunately, once most of these foreclosure fraudsters take your money, you lose your home, too.
An article on the Federal Trade Commission’s website states “Fraudsters use a variety of tactics to find homeowners in distress. Some sift through public foreclosure notices in newspapers and on the internet or through public files at local government offices, and then send personalized letters to homeowners.” Others take a broader approach through basic media outlets. The scam artists use simple messages, like: “Stop foreclosure now!” Once they have your attention, they use a variety of tactics to get your money. By knowing how their scams work, the FTC says you’ll be better able to defend against fraud.
The FTC says there are many different types of scams out there. The following are just a few that are widely used: Phony Counseling or Phantom Help, The “Forensic Audit”, Rent-to-Buy Schemes and Bait and Switch.
Phony Counseling or Phantom Help promises that if you pay them a fee, they’ll negotiate a deal with your lender to reduce your mortgage payments or to save your home. They may claim to be attorneys or represent a law firm. They may tell you not to contact your lender, lawyer, or credit counselor. They promise to handle all the details once you pay them a fee. Then they stop returning your calls and take off with your money.
The “Forensic Audit” uses so-called forensic loan “auditors,” mortgage loan “auditors,” or foreclosure prevention “auditors” that offer to have an attorney or other expert review your mortgage documents to determine if your lender complied with the law. The “auditors” say you can use their report to avoid foreclosure, speed the loan modification process, reduce what you owe, or even cancel your loan. In fact, there’s no evidence that forensic loan audits will help you get a loan modification or any other mortgage relief.
The Rent-to-Buy Schemes tell you to surrender the title to your house as part of a deal that allows you to stay there as a renter and buy it back later. They say that surrendering the title will let a borrower with a better credit rating get new financing and prevent the loss of the home. But the terms of these deals usually are so expensive that buying back your home becomes impossible. You lose the house and the scam artist walks off with the money you put into it.
In a Bait-and-Switch scam, con artists give you papers they claim you need to sign to get another loan to make your mortgage current. But buried in the stack is a document that surrenders the title to your house to the scammers in exchange for a “rescue” loan.