Foreclosure recovery scams are marketed to homeowners as “foreclosure rescue”. While sounding innocently magnanimous, it is neither. These scams are fraud.
The Scam Artist
These crafty creatures will send some warning signals they are not all they appear to be. He will be a stranger who approaches you with an unsolicited rescue offer. She will be calling your telephone, handing you a flyer or mailing you information on how to “save your home”.
They change tactics with each new victim, have learned from victims who got away and those who they scammed. The offer to do all of the paperwork in the “comfort of your home” is a red flag. With no legitimate office, they are keeping their overhead low and mobility high. Remember, business cards are printed and shipped everyday for free.
Choosing a Victim
The targets of foreclosure rescue fraud are always “distressed” homeowners, ones who are either struggling to make mortgage payments or anxious to sell their homes. Many scam artists subscribe to foreclosure listing services to get first crack at homes in pre-foreclosure. Others will befriend an employee in a mortgage company from whom they will get names or addresses of homeowners in foreclosure danger.
They will stay away from homeowners with loyalty to the mortgage holder or a relationship with a credit counseling service. The scam artist will not beg. If told “no” more than twice, “I need my attorney to look at these papers,” or “What is your company’s Federal EIN?,” the scam artist will not risk getting caught.
Sam, the scam artist, will approach a distressed homeowner, James. He will offer to pay off James’ delinquent mortgage and allow James to stay in his home, paying rent until his financial situation improves. To James, this sounds like a kind offer, since he will get to stay in his home and not have a foreclosure on his credit report. When James says “yes”, Sam will bring in his partner, Paul.
Sam will bring Paul to James’ house. Paul will play the part of the investor, who wants to buy James’ house as an investment property. Paul will tour the house and approve of the condition of the house. He will tell James he likes the idea of the property already having a tenant. Paul is in a hurry. He needs to sign the paperwork as soon as possible because he needs to travel out of town to view other properties or take care of other business.
Signing the Contract
Sam explains to James. Paul will buy the house from James and pay off the delinquent mortgage. James will get to stay in his home and pay rent. James signs a contract which transfers the deed of the house to Paul. Sam congratulates James on his “wise decision” to save his home and credit report from foreclosure.
Take the Money and Run
Paul’s loan pays off James’ delinquent mortgage balance. Without paying one penny, Paul has acquired the equity in James’ house. With the deed with his name on it, Paul goes to the bank and removes all of the equity, with a home-equity loan. Paul goes on vacation.
Evicted from the Home
James and his family are living in the home which does not belong to them and paying rent to Paul by mail. James trusts that Paul is making payments on the house to keep it out of foreclosure. Paul never makes a loan payment. The bank forecloses on the house when the loan is defaulted and evicts James and his family from the house. James has lost his equity and his home.
Safeguards against Foreclosure Rescue Fraud
~ Learn your foreclosure rights.
~ Always deal with a reputable organization, in their office.
~ You should have plenty of time to read the documents. Do not be rushed to sign without reading and understanding every word. You may have a friend, relative or counselor with you. The deal should not be complicated on paper.
~ If you do not understand the contracts, ask questions or bring the paperwork to foreclosure counselor or a real estate attorney.
~ If the contracts have blanks or false information, do not sign. This is fraud which can be traced to you and for which you could be prosecuted and go to jail.
~ If approached by a scam artist, report to Consumer Fraud Reporting.
Foreclosure recovery scams never rescue the homeowner from his debt: They rob him of his equity. Protect yourself from these criminals and don’t lose your home.