Foreclosure Recovery Scams
FORECLOSURE ALERT
If your property mortgage is delinquent and you are facing foreclosure, you may be contacted by a person or company willing to take the property off your hands to save your credit. While some of these companies are actually good and do help, others are not.
- Do not sign anything that you do not understand or that is blank. Go through a reputable escrow company to make sure that your mortgage(s) is paid off to the satisfaction of the lender(s). If you do not do this, you may find that the person or company has title to or owns your property, yet the mortgage is still in your name. The person or company pays nothing to the mortgage(s) holder. The foreclosure happens. Your credit is ruined while the company “saving” your credit has made money from your property by renting it until the foreclosure.
If you think you’ve been a victim of this fraud, contact Nevada Consumer Affairs Division at (702) 486-7355 or (775) 688-1800.
Common Foreclosure Scams
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Equity skimming: A "buyer" approaches you, offering to get you out of financial trouble by promising to pay off your mortgage or give you a sum of money when the property is sold. The "buyer" may suggest that you move out quickly and deed the property to him or her. The "buyer" then collects rent for a time, does not make any mortgage payments, and allows the lender to foreclose. Remember, signing over your deed to someone else does not necessarily relieve you of your obligation on your loan.
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Phantom help: The "rescuer" charges outrageous fees for light-duty phone calls or paperwork that the homeowner could easily do, none of which results in saving the home. This predatory scam gives homeowners a false sense of hope and prevents them from seeking qualified help.
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The bailout: In this scam, the homeowner is deceived into signing over title with the belief that he will be able to remain in the house as a renter and eventually buy it back over time. The terms of these scams are so onerous that the buy-back becomes impossible, the homeowner loses possession and the "rescuer" walks off with most or all of the equity.
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The bait-and-switch: In this scam, the homeowners think they are signing documents to bring the mortgage current, but instead actually surrender their ownership. They usually don't even know they've been scammed until they're evicted.
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Phony counseling agencies. Some groups calling themselves "counseling agencies" may approach you and offer to perform certain services for a fee. These could well be services you could do for yourself for free, such as negotiating a new payment plan with your lender, or pursuing a pre-foreclosure sale.
7 Ways to Avoid Foreclosure Scams
Follow these tips from the National Consumer Law Center.
- Don't panic. Get detailed information about the deadlines
you face in resolving your problems. Pay special attention to
the date on which you would lose legal right to ownership.
- Never sign a contract under pressure. Take your time, and
consult a lawyer if possible.
- Never sign away ownership via a quitclaim deed or other
means without consulting a lawyer. Be especially suspicious of
offers to lease back your home, in order to buy it back over
time. These offers are weighted against you.
- Never make your mortgage payments to anyone other than your
lender. If you can't pay, do not ignore warning letters from
your lender; contact them instead.
- Beware of any home-sale contract in which you are not
formally released from liability for your mortgage. Make sure
you know the rights you are giving up and that you agree to give
them up.
- Don't sign anything with blank lines or spaces; information
could be added later without your knowledge and consent.
- If you do not speak English, never use a "rescuer's" translator. Instead, insist on using your own translator.
Source: http://www.hud.gov/foreclosure/index.cfm, http://www.bankrate.com/brm/news/mortgages/20050728a1.asp, and the NationalConsumerLawCenter