Foreclosure Scams
Homeowners at risk of foreclosure are very vulnerable and there are many people out there that will take advantage of these desperate people. It is important to be aware of these scams.
One can find foreclosure scams everywhere. The signs that declare that their company buys homes, pay cash for homes and offer fast refinancing are everywhere. The companies that make these claims make their offers sound enticing but the majority of the foreclosure “rescue” companies are scams. If you are not careful, these predators can acquire your home for a lot less than you bought the house for.
Real estate is a very lucrative business and scam artists know this. They are hungry for this real estate money.
There are three types of foreclosure scams, phantom help, the bail out, and the bait and switch. Phantom help is when the person or company charges exorbitant fees for phone calls and paperwork that could be easily done by the homeowner. The calls and paperwork do nothing that can result in saving your home. These things give homeowners false hope and keep them from seeking help from the proper authorities.
The bail-out scam involves tricking the home owner into signing over the title to their home. They are led to believe that they will remain in the house as a renter and buy the house back later. The terms of this deal become oppressive and the buyback never occurs. The homeowner eventually loses their home and the company retains most of the equity.
In the bait and switch scams, the homeowners sign documents that they believe will bring the mortgage current. However, they are actually giving up ownership of their homes. They don’t even realize this until they are served with an eviction notice.
The elderly can also be taken advantage of. Sometimes their own children will tell the parents to put their name on the mortgage and they will always take care of them. However, the children end up kicking their parents out of the home as soon as the papers are signed.
Foreclosure “rescuers” usually place ownership of a home into a trust. This is to avoid the “due-on sale” clause present in most mortgage contracts. Through the trust, they transfer ownership of the home to themselves. Most of the time, the mortgage company is unaware of the change. What happens then is that the homeowner is usually left to pay the mortgage on a house that no longer belongs to them.
So why do homeowners fall for these scams? Many lenders do not explain about foreclosure in a way borrowers will understand. They do not explain foreclosure terms, time-frame, and owner’s rights. Homeowners facing foreclosure are hesitant to ask the right questions because they are essentially ashamed of what they are going through.
Help against these scams is difficult to find. Even those who can afford an attorney will find that not many lawyers will take such a case because the possibility of achieving victory in court is slim.
There is some good news however. Some states are stepping in and paying more attention to these scams. Some states have even put statutes in placing that are specifically targeted toward these foreclosure scams. In 1997, fourteen states passed legislation to protect homeowners. In Massachusetts, the attorney general presents an emergency regulation that banned foreclosure scams. The regulation does not allow title transfers to avoid foreclosure if it isn’t done for profit, like transfers between family members.
What should someone do if they are faced with foreclosure? Refinancing is always an option. It is also important to contact your mortgage company first before going or these foreclosure “rescue” companies. There are solutions available. This may include renegotiating the terms of your mortgage which can save your home or at least let you retain most of your equity if you cannot keep your home.
With an increase in foreclosures, there is an increasing concern about foreclosure scams. It is important to be aware of these scams and avoid them.
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