avoiding foreclosure scams

Foreclosure rescue schemes begin with scammers poring over newspapers, visiting county offices, or checking internet sites to identify homeowners caught up in Foreclosure . Increasingly, these criminals are targeting non-English speaking homeowners. A scam artist may contact distressed homeowners at home, by phone, at work, or by leaving a note on their front door. They also place ads online, in newspapers, and on television.

The message is simple: "Want to remain in your house, preserve your credit score, receive cash, and get a fresh start? We have the tools to make it happen."

There's a Greek proverb that says, "A drowning man will clutch at a straw." In this case, it's a desperate homeowner who will clutch at whatever it takes to save their home and credit rating.

Once a scammer has a homeowner on the hook, they set up a meeting. The first meeting often includes the following pieces of advice:  

• Discontinue all contact with your mortgage lender. 
• Do not speak with a credit counselor. 
• Have no contact with an attorney. 
• Allow me (or us) to take care of all the details and save your home.

In other words, the scammer wants the homeowner to cut contact with anyone who might offer legitimate, legal solutions.  

The goal of the scam artist is to turn a profit as quickly as possible. They are likely to tell the homeowner about the fee they charge for their services. To make it more "convenient," the homeowner can make a lump sum payment or pay in monthly installments. In addition to a fee, the scammer may instruct the distressed homeowner to give them any full or partial payments they would normally send to the mortgage company. And then they will work very hard to convince the struggling homeowner that they will pass the payments along to the lender as they negotiate a settlement.

Unfortunately, scammers have many options from which to choose. Here are some of the most common:

• The loan modification scam

For a fee, a scammer "guarantees" that they will work with the lender to modify the interest rate of the homeowner's existing mortgage. What's more, they guarantee that the rate will be lower than the current rate. The fee can be substantial, but the scammer insists that it will be "worth it" when the homeowner gets to stay in the home.  The scam artist goes through the motions, including collecting the homeowner's mortgage documents. Once the homeowner pays the fee, the scammer disappears.

• The shell game scam 

This scam involves giving the homeowner documents to sign. The scammer may tell the homeowner that they're signing documents for a new loan that allows them to remain in their home, or a document allowing the scammer to negotiate on their behalf. In reality, the homeowner signs over rights to their house. The scammer is then free to sell, rent, or otherwise milk money from the property.

• The fake rent-to-buy scam

With this scheme, the scammer convinces the homeowner to surrender ownership of the house. The scammer promises that the homeowner can rent the house while buying it back over the course of a few years. Sometimes, once the original homeowner becomes a tenant, the scammer slowly raises the rent until it's no longer affordable. If the former owner misses rent payments, they are evicted, and the scammer is free to do whatever they want with the property. For those former owners who manage to make payments, the price to buy the house back is set so high above market value that it's nearly impossible for them to do so

• The forensic audit scam

For a hefty fee, the scammer promises to have a legitimate auditor go over mortgage loan documents to find legal loopholes. The scammer then claims that any violations of federal or state laws will result in the mortgage being eliminated. This is not true.

• The "third party" scam

The scam artist tells the homeowner that they can avoid foreclosure entirely by signing the deed to the home over to a third party (called a "straw buyer") with a high credit score. They go on to claim that the homeowner is free to buy the home back from the third party in as little as one year. If the homeowner falls for it, the third party applies for a cash-out refinance of the property and the scammer walks away with any cash equity left in the home. The straw buyer, of course, was a co-conspirator in the scheme.

The first step to protecting yourself from a foreclosure rescue scheme is knowing what to look for. Avoid anyone who:  

• Guarantees they can keep you in your home: No legitimate organization can guarantee that the lender will go along with a plan to keep you in the home. A guarantee is the first red flag that you're talking to a scammer. 
• Requests upfront payment of fees: You don't pay for groceries until you've chosen them and don't pay a painter before a room is painted. Few legitimate businesses request payment before they've completed the work promised. 
• Asks for your banking information: Allowing someone to access your banking information is dangerous in two ways. Not only can a scammer use that information to access funds in your account, but they can forge a document giving them the right to make a monthly withdrawal to cover their "fees."
•  Wants to review your mortgage documents: Like your banking information, do not allow anyone other than a legitimate Real Estate Professional, lender or attorney to see your mortgage documents. There's enough personal information about you in those documents for a scammer to steal your identity. 
• Tells you to stop making payments: If you're trying to keep up with payments, pay overdue payments, or even make partial payments, a scam artist is likely to tell you to stop. Their promise is that they'll take care of the mortgage company if you send the monthly payment to them instead. Even if they don't ask you to send the money their way, you can be sure that scammers use the line, "You should stop making payments" to entice homeowners to work with them.
• Asks you to sign documents you don't understand: Never sign anything you haven't fully read or don't fully understand. The most talented scam artists can make you believe lies are the truth, and up is down. They may be talking a mile a minute, supposedly explaining the document you're about to sign. Unless you read it for yourself, there's no way to know what you're signing away. 
• Presses you to let them help: If your gut is telling you not to respond to someone offering to save you from foreclosure, listen to your gut. If you're unfortunate enough to speak with a scammer by phone or in person, you'll likely find that they'll push hard for you to "work with them." After all, making people trust them is how scammers make money.

There's a lot to dislike about those who take advantage of vulnerable homeowners, but some scammers are so smooth they can be difficult to spot. If you ever find yourself in the foreclosure process and someone contacts you offering to help, be wary. If they make a false promise like guaranteeing a mortgage modification, you know they are scamming you. Rather than waste a moment with a scam artist, talk to a certified housing counselor for free help. Here's how:  

• Visit the Department of the Treasury and HUD website, makinghomeaffordable.gov, or call their helpline at 1-888-995-4673. 
• Visit the Homeowner Preservation Foundation. Find a counselor in your state who can help explain the options available to you by visiting the Department of Housing and Urban Development's (HUD) website. There, you will find a list of approved housing counseling agencies.