Introduction:
Foreclosure is every homeowner’s nightmare. The stress and worry of what to do and where to go once the house is gone, coupled with the embarrassment of foreclosure, are hard enough to send anyone into a panic. Screams have gone out in the deep of night dedicated to the horrors of foreclosure and its stigma of failure.
The situation is made worse by those who prey upon the weak, the defeated. Scammers have discovered the vulnerability of the homeowner in the midst of losing his home. Some such scams have caused homeowners who would have otherwise been able to survive the capsizing of their financial boat to lose much more than their homes.
There are several known scams, but these are seven of the most common and most devastating to the unsuspecting home owner already experiencing the deep pain of loss. The following are some common scams you should watch for to avoid becoming a victim:
Mortgage Cancellation:
Mortgage cancellation means just what it says. Technically, it’s debt forgiveness and there are federal laws that endorse its proper use. According to the H. R. 1876, The Mortgage Cancellation Relief Act of 2007, there aren’t any taxes due upon the forgiven amount since the mortgage has been forgiven. Used correctly, mortgage cancellation isn’t a scam. The problem comes from the number of fraudulent agencies that use mortgage cancellation as a way of stripping equity from the home instead of securing a second mortgage as promised.
Other Up-Front Fee Scams:
There are many up-front scams to face the homeowner experiencing foreclosure. Often, the fraudulent party will offer phantom services with no ability to have a physical visit with any employee from the agency as a means of gaining an uncomfortably large fee from the homeowner. Sometimes, the agency will charge the home owner fees that are in truth the financing needed to strip equity from the home before selling it to a straw dealer. Once the equity has been liquidated to the agency and the homeowner has financed it, the agency disappears.
If an agency asks for fees up front for services that are not clearly outlined and in writing, suggests that you do not talk to your lender, you are probably dealing with a scam artist. Always get the exact services the agency will provide in writing before any money is exchanged. If you don’t understand the paperwork you are asked to sign, don’t sign and consult with a lawyer.
If you are being asked to sign quit claim deeds and/or to pay a large sum upfront without a contract, you are more than likely being scammed. Always check out an agency through the Better Business Bureau, Google, or Yahoo as well as any other means that make you feel comfortable before sending any money.
Quit-Claims Deeds/Power of Attorney:
If you are asked to sign a quit claims deed or power of attorney in exchange for getting your foreclosure stopped, stop and read the fine print. While there are times when a power of attorney is necessary, foreclosure isn’t one of them. These are two methods used by fraudulent agencies and agents to gain possession of your home. Quit claims deeds are really a fancy trick to take a homeowner’s house without a need to do so and under fraudulent pretenses. Usually, this is done or attempted when a home is subject to a tax lien sale.
Tax lien sales sound scary. However, it isn’t the home that is usually at risk. Investors buy tax liens on properties that have fallen behind and then give the homeowners four years to pay the taxes before it ever reaches the hands of a lien holder.
Deeds in Escrow:
The best way to avoid a deed in escrow fraud is to use a title service company. In order for a deed to be legally placed in escrow, there has to be a delivery made. In other words, many deeds in escrow frauds occur when the owner offers to allow the fraudulent buyer access to the deed for observation or further scrutiny, thinking that the delivery of the home in exchange for the agreed payment is to be met. The fraudulent party instead takes possession of the deed and ownership of the home without fulfilling the intent of the closing arrangements for legal ownership of the home. Usually this is done by either having the owner sign the deed prior to the observation of the deed by the fraudulent party or by forgery. Once the name on the deed has been changed and is in possession of a third party, homeowners find themselves homeless.
Trust Scams
Because the word trust conveys a feeling of good will in our society, scam artists play upon it. In real estate and other forms of trust scams, the salesperson generally targets home owners in their 50’s. The full scope of what is lost in these scams is not usually realized until the death of the homeowner. In short, a trust can transfer ownership of the house after death. It is similar to a will. The promises of lower taxes and avoidance of contested wills as well as creditors who may have a claim to some of your estate for unpaid expenses at the time of death are usually used to lure victims of trust scams in further. However, in truth, this type of a trust creates a payment for the homeowner to the trust agency as the home owner is charged for the purchase of the trust. In addition, the transference of inheritance to a wrongful party occurs as gain is acquired fraudulently.
Seller Leasebacks:
Seller leasebacks should be avoided at all costs. The fraudulent party promises to refinance or otherwise gain a second mortgage on the property in this type of scam, and then resells the property to the owner on ridiculously inflated terms. The homeowners who fall prey to this predatory scam find themselves unable to make the demands of the new mortgage and lose their homes. This is one of the most common and most disastrous of scams for the home owner already facing the threat of foreclosure.
Bankruptcy Scams:
Everyone’s heard of bankruptcy to eliminate uncontrollable debt. However, there are bankruptcy foreclosure scams that target homeowners facing foreclosure on their homes due to mortgage trouble. You may be asked to allow refinancing from fraudulent bankruptcy operators and to make your mortgage payments directly to the operators of the scam. Instead of making the payments and filing for refinancing as promised, the scam operators take your money and file bankruptcy in your name. This only stops foreclosure for a little while. Once you don’t show up in court for participation in the bankruptcy proceedings because you are unaware that bankruptcy has been filed, the judge has no choice but to dismiss the case and allow foreclosure proceedings to continue.
Are You a Victim?
How can you tell if you’re a victim of any of these scams or other scams not listed here? If you are being asked for information without a contract, be wary. Reputable agencies work under contract and are available for more than phantom phone help. Check with the BBB to see if an agent or agency you are using has had complaints or problems in the area of expertise that you are seeking. If they are listed and the complaints have been substantiated by the Better Business Bureau, be very careful in how you proceed. Finally, if you have been asked to send large up-front sums for services you have no written verification of, be wary. Victims are often already under stress and are vulnerable. By following the common sense rules of researching and refusing to send money without a contractual agreement, you can avoid being a victim of fraudulent activities.
How to Stop Foreclosure Yourself:
There are many things you can do to stop foreclosure yourself. One of the most important actions you can take is talking to your lender. Lenders have a vested interest in the home owner and don’t want to foreclose. Doing so hurts the lender’s chances of receiving lower interest rates on loans made based on a past record of losses in ventures such as real estate loans. Your lender isn’t a real estate agent and doesn’t want to be one. The lender may be able to work out deferred payments or readjust the terms of your loan. Download the free book at the top of the page to save your home and rebuild your credit!