How to Avoid Being Scammed with Foreclosure

How to Avoid Being Scammed with Foreclosure

It is unfortunate, but throughout history, con artist have preyed upon the misfortune of others to achieve their own personal gains. With the recent foreclosure epidemic sweeping the nation, scammers have devised new tricks that intend to defraud homeowners and steal their home. Whether you are facing foreclosure or not, do not let another minute go by without knowing a how a crook can pull the wool over your eyes and steal your home.

The ugly truth is that many homeowners were placed in bad loans by lenders in the first place. Adjustable Rate Mortgages(ARM's), Balloon Payments, Interest Only(IO) loans, Stated Income and Pick a Pay options were just a few dirty little tricks mortgage brokers were using to place unqualified applicants into homes that they simply could not afford. This coupled with a sluggish economy and high unemployment rates sent the nation into a tailspin and foreclosures have been steadily increasing throughout the US in the last couple of years.

Let's take a minute to go over some of the most common scams that con artist use to defraud homeowners facing foreclosure:

1. Predatory Lending- We touched on this earlier, but basically lenders offer loans with the specific intention of taking advantage of a borrower who can not afford to make their payments. Lenders attempt to strip the remaining equity out of the home with huge fees, high interest rates, adjustable mortgage rates and prepayment penalties that leave the homeowner "upside down" in a mortgage that they can not pay. Also be aware of brokers who suggest that you refinance often. Usually they are stripping the equity out of your home with fees. Brokers also attempt to "pad" appraisals by paying appraisers to inflate the value of your home to decrease your loan to value ratio and place a bigger loan against the title of your home. These mortgage scammers usually have hand shake deals with appraisers and the practice is against the law. Be aware of the old "bait and switch" practice that many lenders and brokers practice when disclosing the fees. AND - Always ask for the final HUD statement to review prior to getting to the closing table.

2. Sales Leaseback- So called investors will contact borrowers that are having difficulty paying their existing home loan. Usually they will act as if they are attempting to first trying to refinance the home loan into a conventional loan to improve the borrower's current situation. The scammer usually knows at this point that the homeowner will not qualify, and when the loan is rejected, they suddenly have a "miracle" solution to save your home. The scammer requires that the homeowner hand over the deed to their property usually though a complex series of paper transactions, and allows the homeowner to stay in the home to make lease payments. Even if you hand your deed over to someone else, you are still responsible for making your mortgage payments(They will not tell you that). Finally, when you default on your home loan and the lender forecloses on your property, your are evicted and the scammer acquires your property, and you are left with nothing.

3. Loss Mitigation- This is a tricky one. Some companies can offer legitimate help, but as always the devil is in the details. A loss mitigation is an attempt by a 3rd party to negotiate with your lender for a modification of your existing home loan to prevent foreclosure and provide a more beneficial term such as decreased payment. The scammers will promise to save your from foreclosure if you only pay a fee. States , like California, have outlawed companies from accepting a fee in advance for loss mitigation services., This has been an attempt to prevent the practice of accepting fees for making false promises of foreclosure prevention. Many times, loss mitigation scammers promise to save a person's home and the con artist will keep the fee you are out the money and your house!

4. List and Sell- In this desperate housing market, some real estate agents have gotten greedy and chosen to scam the homeowners they are supposed to help. In a "list and sell", the agent promises to a homeowner who has defaulted on their home loan that they sell their home before the foreclosure goes through(usually within 60 days) or the agent will purchase the property. The agent will then list the home at an inflated value in MLS and when the house doesn't sell, the agent offers to buy the house at significantly lower price than then the value of the house. Be sure that you investigate the companies and people you choose to work with when you are dealing with your home. Scammers are just around the corner waiting to take advantage of your misfortune. Read the fine print! Do your due diligence to acquire as much information as you can about those who you choose to do business. If you think you are victim of fraud surrounding your home, there are some organizations that are designed to help you in your time of need. ACORN or the Association of Community Organization for Reform Now, the Consumers Union or HUD(US Housing Office of Urban Development). Think are in danger of losing your home to foreclosure? Do not ignore the problem, remain proactive and contract your lender as soon as you think that there may be a problem with your loan. Stay in contact with your bank and read up on the laws in your state on foreclosure and remain proctive by continuing to negotiate with your bank

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