NDSU Extension Service - Ramsey County

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Foreclosure Scams

Foreclosure Scams

          The housing market in the United States may still have a long ways to go til recovery, but business is really booming for foreclosure rescue and loan modification scammers.

          The US Government Accountability Office (GAO) released a report in July 2010 entitled "Home Ownership Preservation" that

highlights two main categories of scams when it comes to home foreclosures - advance-fee loan modification schemes and sales-leaseback schemes. 

          Advance-fee schemes are the most common.  In an advance-fee scheme, someone charges you a fee in advance to negotiate a deal with your mortgage lender.  They may even offer a money-back guarantee.  But the usual outcome is that they take your money, provide little or no service, and then refuse to refund the fee.  In a sales-leaseback scheme, the scammer persuades you to transfer your deed to them by offering to assume your payments and let you pay rent while you get your affairs in order.  They promise to sell the property back to you once your financial situation improves, but, of course, they don't.  Often they take out another loan on the home or even sell it to someone else.

          The Federal Trade Commission also reports on a new twist on the advance-fee scam that's showing up this year, a "forensic mortgage loan audit."  The scammer offers to find regulatory violations in your original mortgage that will help you avoid foreclosure or even cancel your loan.  Except of course, there are no violations to be found.

          Here are some “red flags” to be aware of when looking for foreclosure help, courtesy of the FTC. You should avoid any business that:

-         Guarantees to stop the foreclosure process – no matter what your circumstances

-         Instructs you not to contact your lender, lawyer, or credit or housing counselor

-         Collects a fee before providing you with any services

-         Accepts payment only by cashier’s check or wire transfer

-         Encourages you to lease your home so you can buy it back over time

-         Instructs you to make your mortgage payments directly to it, rather than your lender

-         Instructs you to transfer your property deed or title to it

-         Offers to buy your house for cash at a fixed price that is not set by the housing market at the time of sale

-         Offers to fill out paperwork for you and does not give you a copy

-         Pressures you to sign paperwork you haven’t had a chance to read thoroughly, that you don’t understand or that has uncompleted areas.

 

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