One of the fundamental principles of capitalism is that, if there are a sufficient number of consumers who wish to purchase a product or service, a market will be created to sell it to them. If there's money to be made meeting some need or want, whether it's real or imagined, vital or not, some entrepreneur will provide it and try to turn a profit. We're all grateful that farmers meet our need for food, and Hollywood meets our desire for entertainment (sometimes), and we're happy to hand over our money for those things. But there will always be some entrepreneurs who are intent on making money by deception, or by taking advantage of consumers who wish to purchase a miracle.
Unfortunately, the serious business of defending homeowners from foreclosure has seen a number of immoral players who have told homeowners only what they want to hear instead of the whole truth, or simply lied to them. These con artists say they will help you with a solution to your mortgage problems but do not deliver, and can actually leave your finances in worse shape. Being aware of what the most common scams are can help you avoid being a victim of them.
Common scams and how they work
First, one of the reasons scams can seem legitimate is that their perpetrators seem to know personal information about you and your home that you would assume only the lender and the government could know. In fact, the fraudsters probably found your information from publicly available foreclosure notices, and included that information in an official-looking letter.
Or, the scammers place advertisements in the newspaper, online, or at bus stops and wait for you to call them. Their ads will often make unrealistic promises and claims. Once they have gained your attention, they use whatever methods necessary to take your money and make it theirs, such as:
Phony Counseling Services
These scammers say that, for a fee, they'll negotiate with your lender to get you a lower monthly payment or take some other action to save your home. Sometimes they will tell you not to contact your lender or lawyer, which is a giant red flag. They say they will take care of everything as soon as you get them their fee, then they ask for more money or disappear like a scent in the breeze. These types of scammers have even told homeowners to make payments directly to them. There are legitimate counseling agencies but they would never advise you not to talk to your lawyer or lender, or to give them your mortgage payment.
In this scam the fraudsters will offer you a loan to help you get caught up on your mortgage payments, but the paperwork you sign includes a document that transfers the title of your home to them. Having the money to make your mortgage payment isn't going to help if you don't have a home.
This scam involves an offer to review your loan, for a fee, to see if your lender violated any laws. These con artists say that their report will help you get a loan modification, avoid foreclosure, and more, but there is no proof that a forensic audit report can help you with your mortgage problems.
Perpetrators of the rent-to-buy fraud encourage homeowners to make a deal to surrender the title to their home, stay in the home as renters, and then buy it back. They say that a new borrower with better credit and financing will be able to rent your home to you at an affordable rate. However, it is often too expensive for you to buy back the home, and if the new owner is foreclosed, you're evicted.
Remember that it is illegal for a company to:
- Take money from you for loan modification assistance until you have accepted an offer for loan modification from your lender. This practice is made illegal by the the Federal Trade Commission's (FTC) Mortgage Assistance Relief Services (MARS) Rule.
- Tell you to stop paying your mortgage. They must also warn you that stopping monthly payments to your lender will damage your credit.
- Tell you to stop talking to your lender.
There will always be some unethical entrepreneurs who are willing to take advantage of people even when they are experiencing a crisis as serious as losing their home. Now that you are aware of some of the more common foreclosure scams, you have a better chance of avoiding them.
Reputable law firms do not tell clients what they want to hear, they tell them the truth. Any experienced firm should be able to show you case results that demonstrate a record of success, and their attorneys should be in good standing with the bar in the states they practice law in.
Finding the right foreclosure defense law firm for your needs does not need to be difficult. You only need to educate yourself and do a little research to retain a law firm with experience, and give yourself the best chance to keep your home.