Homeowners in distress are often the focus of “easy out credit scammers.” These entities call themselves foreclosure rescue companies, foreclosure assistance firms, or something similar. The scammer offers empty promises to the distressed homeowner in an attempt to make a quick profit from the distressed homeowner’s misfortune. With these companies, in the end the homeowner loses their home, as well as the money they paid the scammer in hopes of avoiding foreclosure.
Once the pre-foreclosure is under way, the court records the public notice of the action in the court or government records. Scammers can legally access these public records. They can also see foreclosure notices published in newspapers or online. With this knowledge, a scammer can then contact the homeowner, offering their services to prevent foreclosure. Other companies may use more traditional mass media to advertise their “resue” or “assistance” programs enticing the homeowner to contact them.
Watch out for companies that charge an upfront fee (excluding law firms which are legitimate foreclosure defense attorneys that can help the consumer defend a court action and help with other foreclosure defenses to save the consumer’s home) stating they can help you save your home with a foreclosure modification or other options. They do nothing but take your money. Prosecutors warn that many of these are local companies which are run by former mortgage brokers and thus they may be knowledgeable, but many are in fact scammers who make empty promises they fail to live up to, while others are just plain crooks who take the money and never make any attempt to help the homeowner at all. Some have official looking websites that give consumers the impression that they are endorsed or approved by the government.
How to Recognize a Reputable Company
There are many legitimate modification companies, and mortgage brokers that can help consumers in there efforts to secure a mortgage modification however, homeowners should contact the Better Business Bureau, the Federal Trade Commission or HUD. Homeowners should also understand that only 1% of all mortgage modifications actually result in a principal reduction and if a company promises to get your principal reduced chances are they are not being honest with you!
For those looking to sell their home through a short sale, be aware that over 40% of total home sales which occurred in 2009 were short sales, a number which is expected to increase in 2010. In light of this many real estate agents see the opportunity this market segment represents and have rushed out to take one or more short sale educational courses. Upon completing these courses they immediately begin promoting themselves as short sale specialist. What these agents fail to realize is that these transactions are highly complex and require a very specific knowledge and skill set which can not be acquired simply through an educational course.
Homeowners considering the short sale of their home should ask the agents they interview how many homes they’ve sold short and if they’ve previously worked with their lender as each lenders process varies slightly. Homeowners should also request the agent provide a list of the homes they’ve sold short and this should be double checked on a site such as Trulia or Zillow which include records of recent home sales including the name of the listing agent who sold the property.
Examples of Scams
High cost, and phony credit counselors – the scammer offers to be an intermediary between the homeowner and the lender. The scammer recommends that the homeowner use the scammer as the sole point of contact, usually for an upfront fee. Once the fee is paid, the scammer disappears. In an extended version of this scam, the scammer informs the homeowner of the completed arrangements for reduced payments (forbearance). The scammer actually collects these payments, but never forwards the money to the lender. Of course, foreclosure eventually happens, and the scammer disappears.
Signing over the deed – there are many variations to this scheme. The scammer may convince the homeowner to refinance the mortgage. In the pile of documents, the scammer will have a deed to the property. The unsuspecting homeowner might sign this, thereby giving the property to the œlender, or scammer, instead of actually refinancing the loan. Another variant of this scam occurs when the scammer has the homeowner sign over the title with a promise to get the home sold quickly and at a good price. The scammer asks the homeowner to move out so the property can be sold, promising a split of any equity remaining after the sale. The scammer rents the home, keeps the money, and disappears when the foreclosure eventually occurs. The scammer may also simply sell the home and make off with all of the equity or profit. Other variants of this scam include the lease to buy back scheme. The homeowner needs to read every page when refinancing. Always consult with an attorney when any deed is involved.
Lease to buy back options – Here, the scammer offers the homeowner an opportunity to remain in the home while working through their financial problems. The scammer takes the title to the property from the homeowner, promising to renegotiate the loan using their (the scammer’s) better credit rating. The homeowner signs a lease agreement that provides them an opportunity to buy the home back in the future. The scammer makes the terms of the lease and/or the buyback very restrictive, perhaps having regular rent increases or severe late payment penalties that eventually the former homeowner cannot meet. The scammer has the homeowner, now the tenant, evicted; and the homeowner loses the right to buy the home back. In another version of this scheme, the scammer actually takes out a mortgage to capture all or most of the equity. With the cash in hand, the scammer then defaults on the note, the lender forecloses on the property, and the evicted former homeowner retains no right to buy back the property.
Desperate Borrowers Seeking a Resolution
A homeowner facing foreclosure is under stress and could be susceptible to “too good to be true” promises of help. Caution is called for! While many scams are outright fraud and illegal, others are often technically legal. The homeowner must be alert for any unsolicited or advertised offers of help that involve high upfront fees, promises of “guaranteed” success, little or no effort on the homeowner’s part, unexplained paperwork or blank forms, signing over the Deed as a condition of assistance, cash purchase offers with a quick closing, and any lease agreements as part of the “help”.
If you are a homeowner who feels they might qualify as a short sale candidate and are looking for an agent who specializes in these types of sales, or just need guidance, please give us a call at 614.332.6984 as we’d be happy to assist you in exploring this option and locating a buyer for your home!
The Opland Group Specializes in Real Estate Sales, Luxury Home Sales, Short Sales in; Bexley 43209 Columbus 43201 43206 43214 43215 Delaware 43015 Dublin 43016 43017 Gahanna 43219 43230 Grandview Heights 43212 Hilliard 43026 Lewis Center 43035 Marysville 43040 43041 New Albany 43054 Pickerington 43147 Powell 43065 Upper Arlington 43220 43221 Westerville 43081 43082 Worthington 43235