8/7/2019 Foreclosure Rescue Scams - How to Avoid Becoming a Victim

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Foreclosure rescue scams target homeowners fac-

ing foreclosure, particularly if they are equity-richbut cash-poor. Rescue scams cost consumers

thousands of dollars and, often, their most valuableasset — their homes. [This information was updatedin April 2009 from an article originally published inthe 2007 edition of the Community Liaison .]

With foreclosure rates on the rise, foreclosure rescuescams are also increasing.1 The elderly, and peoplewith low incomes or blemished credit, are particularlyvulnerable.

Common Types of

Foreclosure Rescue Scams

Perpetrators of rescue scams promise much-neededhelp to homeowners in financial straits. The fraudulentpractices generally fall into the following three cate-gories.

Phantom  help -  The rescuer charges exorbitantfees for telephone calls and paperwork that thehomeowner easily could have handled, or promis-es robust representation and services that nevermaterialize. In either event, the homeowner mayhave little or no financial resources remaining tosave the home.

Bailout - The rescuer bails out the homeowner byhelping “dispose of” the house. The homeownertypically surrenders title to the house while believ-ing they can stay on as renters and buy the houseback once they resolve their financial matters. Theterms are typically so onerous, however, thatrepurchase becomes impossible, the homeownerpermanently loses possession, and the “rescuer”walks off with all, or most, of the homeowner’sequity.

Bait and switch - Rescuers tell the victims they will

obtain a new loan that will solve their problems. Inreality, the homeowner signs documents that givethe scammers ownership of the home, while thevictims remain responsible for the mortgagerepayment obligations.

Many homeowners believed they were signing doc-uments for a new loan to make the mortgage cur-rent, or arranging for an intermediary to negotiatemore favorable terms with the lender. Victims saythey had no intention of selling or giving up their

home, although there frequently is no written doc-umentation to substantiate agreed-upon terms andconditions.

How Do Rescue ScamsWork?

While various programs can work to some extent forsome borrowers, homeowners should carefully consid-er and review foreclosure rescue offers, especiallywhen the potential “rescuer” seeks them out. The fol-lowing list comprises tactics frequently used in fore-closure rescue scams:

An individual or a company, after reviewing pub-licly available foreclosure notices, contacts thehomeowner, offering to lend money to “stop fore-closure” or “save your house.” These businessesoften refer to themselves as foreclosure consul- tants or foreclosure rescue specialists . Initial con-tact may occur by telephone, personal visit, orcard/flyer left at the home, and often consists of asimple yet powerful message such as “Stop fore- closure with just one phone call,” “I’d like to $buy$ your house,” “You have options,” or “Do you need instant debt relief and cash?” 

At this point, the lender has not foreclosed on theproperty, although foreclosure is possible becausethe homeowner has fallen behind on mortgagepayments.

Foreclosure Rescue Scams:How to Avoid Becoming a Victim

Initial discussions emphasize a “fresh start,” and

often feature “testimonials” from other homeowners the rescuer has supposedly helped.

Scammers may instruct the homeowner to ceaseall contact with lawyers or the mortgage lenderand let the rescuer handle negotiations. This tac-tic cuts off access to refinancing options whilerunning out the clock on legitimate ways to pre-vent the foreclosure.

The homeowner loses the property when the scamis completed or the house is sold to someone elseat foreclosure. If there is a foreclosure sale, theremay be little, if any, equity remaining.

Facing Foreclosure:What You Can Do

The following outline advises homeowners on con-structive ways to deal with pending foreclosure:

Do not panic or avoid the issue. The problem wilnot go away, and will worsen if ignored.

Check the Web site of the U.S. Department ofHousing and Urban Development (HUD) to locatea HUD-approved housing counselor. HUD’s Web

site lists certified counselors by state athttp://www.hud.gov/offices/hsg/sfh/hcc/hcs.cfm.

Check the following Web sites for foreclosure pre-vention resources:

HOPE NOW at http://www.hopenow.com/HOPE NOW is an alliance of HUD-approvedcounseling agencies, mortgage companiesinvestors and other mortgage market partici-pants that provides free foreclosure preven-tion assistance. The site features informationabout the HOPE hotline, 1-888-995-HOPEwhich is staffed by HUD-approved credit

counselors who can guide homeowners toforeclosure options.

NeighborWorks® America athttp://www.nw.org/network/home.asp.NeighborWorks® America administers thefederally appropriated National ForeclosureMitigation Counseling (NFMC) programwhich was created to significantly increasethe availability of housing counseling gearedto homeowners at risk of foreclosure.

1 Foreclosure filings in the U.S. climbed 30 percent in February 2009 from the previous year, according to RealtyTrac, Inc. data. Properties with first-time foreclosure filings totaled 161,976, the highest number inRealtyTrac records dating to January 2005. One in 440 U.S. housing units received a foreclosure filing in February 2009; filings rose 6 percent from January 2009 figures.

8/7/2019 Foreclosure Rescue Scams - How to Avoid Becoming a Victim

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NeighborWorks® America participates inthe HOPE NOW Alliance.

The Obama Administration has launched acomprehensive Financial Stability Plan toaddress key problems in the current housingcrisis. A major initiative of that effort is“Making Home Affordable,” a plan to stabilizethe housing market and help up to 7 to 9 mil-

lion Americans reduce their monthly mort-gage payments to more affordable levels.Check the Web site at http://www.makinghomeaffordable.gov/ for further information.

Make sure that your home actually is in foreclo-sure. If you are behind in your mortgage pay-ments, you will receive a delinquency notice fromthe lender. These letters notify you of your delin-quency and give you a chance to resolve the debt.If you receive a Notice of Trustee’s Sale , or simi-lar document, your home is in foreclosure, andyou need to respond accordingly.

Ask your lender about renegotiating or refinanc-ing your loan or working out a payment plan. Behonest about your financial situation. The sooneryou contact your lender, the sooner you may beable to remedy the problem. The federal bank,thrift and credit union regulatory agencies areencouraging financial institutions to work withhomeowners who are unable to make mortgagepayments. The regulators also have advised finan-cial institutions to consider working with rep-utable consumer advocacy entities to help finan-

cially stressed borrowers avoid predatory foreclo-sure rescue scams.

Contact your attorney, not  one referred by theindividual or company that is involved in the fore-closure prevention/agreement.

Do not sign a contract under duress. Request timeto review documents. If you do not understand adocument’s contents, ask a trusted family mem-ber, attorney, or financial planner to review thedocuments with you.

Do not accept verbal representations. Obtainoffers in writing, and review all written offersthoroughly.

There are legitimate organizations, including nonprof-it consumer advocacy groups that provide services todistressed homeowners. Reputable foreclosure rescueorganizations will work with borrowers who areunable to meet their mortgage obligations, and assisthomeowners in making mutually satisfactory workout

arrangements with their lenders— Prepared by Stacy Messett 

Senior Project Manager in Compliance and Consumer Protection, Office of Thrift Supervision, Washington, DC.

— Updated by Stephanie Caputo 

Senior Compliance Program Specialist in Compliance and Consumer Protection, Office of Thrift Supervision,Washington, DC.

Excerpted Article From The

How do companies successfully lure borrowers into res-cue arrangements? As described in a National ConsumerLaw Center Report, here are a few commonly used ploys.

Employing saturation marketing of purported rescueservices, commonly characterized by exaggerations,misrepresentations, and pressure tactics.

Capitalizing on the homeowner’s desperation to savethe home, obtain needed cash, or make a fresh start,generally conducted in a manner in which the home-owner is encouraged to conclude there is very littletime to act.

Exploiting the homeowner’s belief that someonewould not lie to his or her face - reinforced by manysympathetic-sounding and often face-to-face salespitches - or the false assurance that s/he is beinghelped when, in fact, the homeowner is left in a worsefinancial position.

Keeping homeowners “in the dark” about the fore-

closure process. This includes failure to provide

information about foreclosure deadlines, legal rights,and low-cost alternatives that can save the home.

Using various fraudulent and deceptive documents,including forgeries. Scammers use many complexdocuments that disguise the rescuer’s equity-strip-ping intent. Unscrupulous companies also may usedocuments that run out of space for signatures on

pages containing critical text. The homeowner signs ablank page, and his/her signature is fraudulentlytransferred to an entirely different document.

Using affinity-marketing strategies. These approach-es appeal to the homeowners’ belief that people whoshare similar ethnic, racial, religious or age profilesare their advocates, protecting them from those whodon’t act in their best interests.

Preying on homeowners who lack financial aware-ness, particularly about sophisticated mortgage loanproducts.

The Department of Justice’s U.S. Trustee Programoutlines red flags that homeowners should keep inmind if they are falling behind on their mortgagepayments or facing foreclosure.

Be suspicious of any person or company thatcalls itself a foreclosure consultant , foreclo- sure service , or similar designation.

Be wary of high-pressure marketing tech-niques. This includes the use of flyers ordoor-to-door solicitations.

Proceed with care if an individual or compa-ny attempts to collect fee(s) before providingservices to you, or instructs you to make yourmortgage payments directly to the individ-ual/company.

Be suspicious of offers to take title to your

home and lease it back to you, with thepromise that you can buy it back over time.

Avoid promises to “save your credit” or finda buyer for your home within a specific num-ber of days.

Never sign a contract or other documentsunder pressure. Review all paperwork with arepresentative of your choosing, preferably areal estate attorney.

Do not sign documents containing blank linesor spaces. Unscrupulous parties could addinformation later without your knowledge or

consent. Obtain all terms, conditions, provisions and

special arrangements in writing . Make copies of 

the paperwork for your records.

Rescue Scammers: How They Set the Trap Foreclosure ServiceScams: Know theWarning Signs