When facing the stress of unaffordable mortgage payments, the last thing you want to worry about is whether or not the assistance you receive is in your best interest. Unfortunately, a growing trend of mortgage relief scams has made a challenging situation even more difficult to navigate.
What is Mortgage Relief Fraud? – Mortgage relief fraud occurs when scammers target distressed homeowners seeking assistance in avoiding foreclosure. These unscrupulous companies or individuals generally guarantee a short sale agreement or loan modification and charge an upfront fee to start the service. There have been many reports of desperate homeowners spending thousands of dollars to get help only to find that they had been taken advantage of, lied to, and end up in a worse situation than when they began.
Rip-Off Red Flags – The following items should serve as a warning that a mortgage relief service is not legitimate:
1. Upfront Fees – Always avoid any mortgage relief company that charges upfront fees. Not only is it illegal, it’s certainly a sign that the relief is fraudulent. POINT BLANK: Do not pay for the promise of results … pay for the results themselves.
2. Guarantees – Be suspicious of anyone who guarantees mortgage relief. Any legitimate agent or company should know that the mortgage relief process is complicated and dependant on many factors, and that to guarantee a successful result is unrealistic. Fraudulent parties will make this promise to falsely raise your hopes, making them appear as though they are providing a rare opportunity. As common sense suggests, if it sounds too good to be true, it usually is.
3. Government Affiliation – Certain fraudulent companies present themselves as government agencies or other authoritative entities by creating websites with official-looking seals, official-sounding names, or video clips of politicians. If someone claims to represent the government, a lending institution or a bank, be sure to verify his or her affiliation. The best way to do this is to check with your lender, Better Business Bureau, or the government’s official Making Home Affordable website www.makinghomeaffordable.go
4. Deed Transfer – Beware of people who pressure you to sign papers immediately, or who try to convince you that they can “save” your home if you sign or transfer over the deed to your house. Some call this “taking over your property subject-to existing financing.” But no matter what you are told about why you should sign over the deed, understand that once this is done, you no longer have legal rights to the property and can be removed from it. Always seek legal counsel before proceeding with an option like this.
Common Scams – Along with red flags, there are certain mortgage relief programs that you should be aware of that will alert you to the fact that they may not be legitimate.
1. Phantom Foreclosure Counseling – This is the most common form of mortgage relief fraud in the U.S. The homeowner pays an upfront free to secure a “guaranteed” short sale or loan modification by a company who has little or no intention of assisting the consumer at all. Because the process can be strung out over several months, distressed homeowners have little time to get genuine assistance in saving their homes from foreclosure.
2. Sale/Lease-back or Repurchase – This type of fraud involves the homeowner signing the property deed over to an individual or, most commonly, a “land trust,” that holds the property on behalf of the homeowner (making the consumer liable for taxes and insurance). The land trust rents the property back to homeowners with the agreement that they will be able to repurchase the home when able. The terms of these agreements make them almost impossible for the homeowner to regain legal ownership of the property, and also give the right to the land trust to evict, raise rents, or sell the property.
3. “Bait and Switch” – This scam involves homeowners transferring the property to another owner in exchange for mortgage relief. The homeowner does not know they are selling or “deeding” the property and often the documents are misleading or completely fraudulent. Usually the “purchase price” is a fraction of the home’s worth.
4. Fraudulent Modification – This type of fraud involves a “rescue” company pretending to negotiate with a lender, but in reality only divert “reduced” mortgage payments to themselves without the homeowner’s or lender’s knowledge.
5. Bankruptcy Foreclosure – This scheme involves the scam artist taking an upfront fee to negotiate a mortgage modification, then pocketing the fee and filing for bankruptcy on behalf of the homeowner without the homeowner’s knowledge. This delays foreclosure, but ruins the homeowner’s credit.
Steps You can take to Avoid Mortgage Relief Fraud – With the right assistance, the stress of facing foreclosure becomes manageable. Call your lender and ask to speak to their ‘loss mitigation department’. In addition, consult to Â a licensed real estate professional, who specialize in foreclosure prevention.(IM)