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Foreclosure Scams

How to Avoid Foreclosure Scams

Should you fall behind on your mortgage, it is very common to receive telephone calls, home visits and direct mail from a foreclosure "rescue" service. Scam artists often target defendants named in public records. The scam artists usually inform you that they are "foreclosure specialists" or "mortgage specialists", claiming that they will save your home from foreclosure in exchange for a sum of money.

Unfortunately , many people pay the scam artist, but find out months later that the company has done nothing to stop the foreclosure, and the house is set to be sold at a sheriff's sale. Do not let this happen to you!

Watch out for handwritten notes that refer to the details of your situation, services telling you not to contact your mortgage servicer, services promising to save your house, and large deposits required upfront.

Tips to Avoid Foreclosure Scams

  • Contact your mortgage servicer as soon as you have trouble making payments. You may be able to negotiate a payment schedule. 
  • Contact a HUD-approved housing counselor for assistance if you are receiving letters threatening foreclosure and are not yet in a lawsuit. 
  • Contact http://www.floridabar.org/   to find an attorney to represent you if you have a pending lawsuit against you. 
  • Get detailed information about the deadlines you face in resolving your problems. Pay special attention to the date on which you would lose legal right to ownership of your home. 
  • Be cautious of any claim to stop foreclosure for a fee. Do not make a down payment upfront, and always ask for written information before you make a financial decision. 
  • Never make your mortgage payments to anyone other than your mortgage servicer. If you can't pay, contact your servicer immediately to work out payment arrangements. 
  • Take your time and never sign a contract under pressure. Consult a lawyer or trusted family member before you sign. 
  • Get all promises in writing. Many scam artists make lofty verbal promises but never put them in writing. Always make sure oral agreements are included in a written contract; otherwise they are not guaranteed. 
  • Check companies' reputations before doing business, by researching their reputations with the Better Business Bureau and the http://myfloridalegal.com/  see if other consumers have filed complaints against them. 
  • Never sign away ownership of your home without consulting a lawyer. Be especially suspicious of offers to lease back your home, in order to buy it back over time, and beware of any home-sale contract in which you are not formally released from liability for your mortgage. Make sure you know the rights you are giving up and that you agree to give them up. 
  • Don't sign anything with blank lines or spaces, as information could be added later without your knowledge and consent. 
  • If you do not speak English, never use a "rescuer's" translator. Instead, insist on using your own translator.

Types of Foreclosure Rescue Scams

Phantom help: The "rescuer" charges outrageous fees for simple phone calls or paperwork that you could easily do, none of which results in saving the home. This predatory scam gives you a false sense of hope and prevents you from seeking qualified help.

Equity skimming: A "buyer" approaches you, offering to get you out of financial trouble by promising to pay off your mortgage or give you a sum of money when the property is sold. The "buyer" may suggest that you move out quickly and deed the property to him or her. The "buyer" then collects rent for a time, does not make any mortgage payments, and allows the lender to foreclose. Remember, signing over your deed to someone else does not necessarily relieve you of your obligation on your loan.

The bailout: In this scam, you are deceived into signing over title with the belief that you will be able to remain in the house as a renter and eventually buy it back over time. The terms of these scams are so burdensome that the buy-back becomes impossible, you lose possession, and the "rescuer" walks off with most or all of the equity.

Phony counseling agencies: Some groups that claim to be "counseling agencies" may approach you and offer to perform certain services for a fee. These could be services you could do for yourself for free, such as negotiating a new payment plan with your loan servicer, or pursuing a pre-foreclosure sale.

The bait-and-switch: In this scam, you think you are signing documents to bring the mortgage current, but instead you are actually surrendering your ownership. You usually won't realize that you've been scammed until you're evicted.

Types of Credit Repair Scams

Getting a new Social Security number: Individuals may only have one Social Security number. It is against the law to use a different Social Security number to create a false identity.

Getting a Federal Employer Identification Number (EIN or FEIN): Proponents of this scam claim that you may obtain a federal tax ID number, as if you are a business, then receive a clean credit record under that tax ID number.  It is against the law to use an EIN to set up a false identity. Further, a new credit report under an EIN will not show any credit history. It is unlikely that a creditor would regard a new business with no credit history as a good credit risk.

Challenging every negative entry on a credit history: Credit agencies may keep accurate records of negative entries on your credit history for up to seven years.  They may also keep records of any bankruptcies for up to 10 years. There are certain circumstances where truthful negative information may be reported beyond those time periods. As much as you do not like having negative information on your credit report, your ability to object to inaccurate information is not meant to be a license to harass honest creditors in an effort to remove accurate negative entries.

Be aware that the only ones who can permanently remove the debt from your record are the credit bureau or the creditor.

  • No one can erase negative information if it's accurate. Only incorrect information can be removed. Accurate information stays on your record for seven years from the time it's reported (10 years for bankruptcy). Even information about bills you fell behind on but now are paid will remain on your report for these time periods. 
  • Credit repair services can't ask for payment until they've kept their promises. Federal law also requires credit repair services to give you an explanation of your legal rights, a detailed written contract, and three days to cancel. This applies to for-profit services - not to nonprofit organizations, financial institutions or the creditors. • Be cautious about e-mails for credit services. Many unsolicited e-mails are fraudulent and should be deleted. 
  • You can correct mistakes on your credit report yourself. If you were recently denied credit because of information in your credit report, you have the right to request a free copy. It doesn't cost anything to question or dispute items in your report. Follow the instructions provided by the credit bureau. The major credit bureaus are:

Contact all three, as the information each has may differ. 

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