Straight Talk: Don’t fall for foreclosure rescue scams
By Better Business Bureau
Posted Aug 9, 2020 at 11:00 AM
Are you facing the threat of losing your home? Be wary of individuals and companies offering to “help” you out of your difficult financial situation. Consumer advocates report an increase in complaints about foreclosure “rescue” scams. These scams specifically target homeowners who are in financial distress. Scam operators may advertise over the Internet and in local publications, plaster posters on telephone poles and at bus stops, stick flyers in people’s front doors or contact people whose homes are listed in public foreclosure notices. Sometimes they direct their appeals to specific religious or ethnic groups.
HOW THE SCAM WORKS
In one scenario, the scam operator offers to “buy” the homeowner’s property by paying off the amount that is overdue on the loan. The scammer convinces the homeowner to deed the property over to a third party. The homeowner is given the option of renting the property with the option to buy it back later. The rent payment on the home is often higher than the homeowner can afford. Frequently, the original homeowner cannot make the rent payment and is evicted from their home. Or, if the homeowner expresses a desire to buy back the property, the scam operator usually sets the price of the home higher than the homeowner can afford.
Hapless homeowners can lose their equity and their homes. Sometimes, the homeowner’s troubles go even deeper. In many cases, the initial mortgage has not been paid off and the deed was never transferred, as promised. Not only is the homeowner faced with eviction from the home, but the scam victim may still owe for the original loan amount.
In other versions of the scam, the homeowner receives a call, text, or email with the promise of lowering the mortgage payment and avoiding foreclosure. The scammer sometimes asks for payment for their services in the form of personal checks or gift cards. A recent victim in Ohio reported to BBB Scam Tracker that she sent $3000 in Walmart gift cards to a scammer asking for payment to help lower her interest rate.
The Better Business Bureau advises consumers who are tempted by such offers to recognize that they are at real risk of losing money, equity, their home or all three.
Tips to help if your mortgage is in arrears or you are facing foreclosure:
‒ Talk to your lender. Ask how to restructure your loan payment or how to refinance. Some foreclosure “rescuers” will offer to “negotiate” with your lender or lawyer. Know that such an offer is likely to involve a significant fee. If you are hesitant to talk to your lender yourself, engage the assistance of a trusted family member.
‒ Try selling the house on your own to pay off the lender. Signing over a deed in no way releases you from your mortgage responsibilities!
‒ Don’t allow anyone to complete paperwork for you, or ask you to sign a stack of documents, supposedly to secure a new mortgage. Victims have later learned that they signed a quit-claim deed to their home.
‒ Beware the personal approach. Some less-than-ethical businesses will stuff a handwritten note in your front door or mailbox that implies that “help” is available from someone you know or who has your best interests in mind. Foreclosure scam artists know exactly what neighborhoods to blanket with their offers.
‒ If a foreclosure “rescuer” instructs you not to contact your mortgage company or your attorney, beware. Your mortgage company is the very business that you should be in touch with! Furthermore, why would you agree to cease contact with your attorney when dealing with complicated financial matters that involve perhaps your biggest investment, your home?
‒ You should never sign a contract under pressure and never sign away ownership of your property when you don’t intend to sell it. Ask a trusted family member, your attorney or a financial professional to review any paperwork you may be asked to sign.
‒ Never pay with gift cards. A reputable company will not ask for payment via a gift card.
‒ Before signing any deals with a potential buyer, contact BBB to request a report on the company and check with your state Attorney General and local government department of consumer affairs.
‒ Seek foreclosure prevention information. Try calling the HOPE hotline, 888-995-HOPE, for free foreclosure prevention information, or visit their website at 995hope.org. According to the National Conference of State Legislatures website, the HOPE hotline is operated by the Homeownership Preservation Foundation, a nonprofit “dedicated to preserving homeownership and preventing foreclosure.”
FOR MORE INFORMATION Read more about housing scams in BBB’s Scam Alert on Home Title Fraud. This can be found at www.bbb.org/article/news-releases/22679-bbb-alert-home-title-fraud. If you encounter a scam, we ask that you report it to BBB.org/ScamTracker to help warn others.
I am not a bankruptcy attorney, but I have helped many clients understand when they should look into bankruptcy and when there is no need for a bankruptcy filing because the clients have no assets that creditors can reach. If you are concerned that you are drowning in debt and don't know a good bankruptcy attorney to consult, you can make an appointment with my assistant and discuss your situation; I will be happy to refer you to good consumer bankruptcy attorneys if we decide that bankruptcy is appropriate for your situation.
Below is another article in the terrific series by the National Consumer Law Center on this important subject.
Deciding Whether to File for Bankruptcy: Consumer Debt Advice from NCLC
Maybe the only thing I can think of that's worse than losing a house to foreclosure is squandering a lot of money first on phony foreclosure rescue scams: the scams run by people who say that they can review your loan documents and find you all these reasons that you'll be able to poke holes in the lender's foreclosure case. If you think you got a different loan than you were promised, or that your loan was not the same on paper as it was represented to you, or the lender did something shady at closing, consult an attorney. But first, please, remember, the HUD-Approved Housing Counselors are FREE. And there is no magic sauce that anyone else has that is better than what the HUD-approved counselors can offer you as far as finding resources to help you with the more usual problem, which is too much debt for the money at hand. So if someone approaches you and offers you "help" on your crushing debt or foreclosure issue, don't give them any money, and if they give you suggestions or ideas, run them past the HUD-approved folks to see what they think before you try any of them.
I just got a call from an Oregonian who has owned a home in a lovely part of Oregon for over 40 years, but the third refinance, from 2008, has turned out very badly for this person; monthly income under $600, monthly mortgage $1300. The only thing that could make this difficult situation worse, in my opinion, is wasting the few remaining dollars at hand on phony foreclosure rescue schemes (which also wastes the energy that should be used in preparing a transition to a more affordable situation, if the money needed to maintain the present home is not assured). Thus, the letter below.
Thanks for your call to discuss the problems you are having maintaining payments on your refinanced home. I’m very sorry to hear of your situation, and I certainly wish I had a good suggestion for you; however, you told me that you had already exhausted assistance from the hardest hit funds and that your monthly income is far less than the monthly payment on your loan.
People having trouble paying their mortgage or who maybe need to get mortgage loan modifications should see a HUD- certified housing counselor first!
While these folks are not lawyers, helping people hang onto their homes if they can is their job, so they are familiar with the programs for loan modification and their requirements.
And, because they are government-funded, they do not charge clients for their services. Click here to find one near where you live:
WILLIAM M. ACKER, JR., District Judge.
A consumer-rights leader and expert sends the following comment:
Prof. Gerry Beyer of Texas Tech posted about the latest in his "Wills Trusts and Estates" blog. He writes:
"[R]everse mortgages allow individuals 62 and over to receive money from a bank [now] in return for their home upon their death. . . . Reverse mortgage rules are going to change, which could mean less available funds for borrowers. The changes can also lower the program's high default rate.
[New] rules are expected to go into effect as early as October 1. The changes will reduce the number of homeowners that will qualify for reverse mortgages and the maximum amount will be reduced as well.
People who apply before October 1 will qualify for the amounts under the rules now. Folks that are considering a reverse mortgage should act quickly if they want the current laws to apply."
John Gear Law Office -