As we know, record numbers of homeowners are defaulting on their mortgages and losing their most precious asset to foreclosure. Unfortunately, this ongoing crisis has opened up opportunities for scam artists to prey on the desperation of distressed homeowners who fear losing their home.
Scotty Ball, a real estate attorney, specializes in residential and commercial real estate law with the Stewart, Melvin & Frost law firm in Gainesville, Ga.. He certainly has a unique insight and perspective on what is taking place on the front lines of the real estate market crisis. One thing he cautions local homeowners on is foreclosure rescue scams.
Question: Sometimes it’s hard to understand why people fall for various money scams over the telephone or computer. But these foreclosure-rescue scams are a little different? Why is this type of scam so often successful?
Scotty: First, there are lots of potential victims to choose from. If one homeowner doesn’t fall for a foreclosure-rescue scam, there are plenty other potential victims out there.
It’s easy to find victims. Notices of default are public record. The information is available on-line and printed in the local newspaper.
People facing foreclosure are especially desperate, because their home is so important to them. They are much more willing to listen to someone who offers a chance to keep their home.
Question: How do these scams work?
Scotty: There are basically four types of foreclosure scams.
No. 1 – Sale-Leaseback Scam: The scammer offers to buy the victim’s home (much less than market value) just to get the mortgage back up to date – and get the lender off your back. As part of the deal, the scammer allows the victim to pay rent and continue to live in the home with the promise of an opportunity to buy it back at a later time. The catch is in the fine print — the rent payments and buyback provisions eventually become so impossible to fulfill that the scammer ends up with your home in the end.
No. 2 – Fee Scheme: The scammer pretends to be a foreclosure consultant and offers to represent the victim with the lender and work to avoid the pending foreclosure. In this scenario, the scammer typically charges high fees up front for services that are never performed. Unfortunately, by the time the homeowner realizes he has been scammed, it is too late to work with the lender or find effective assistance to avoid the foreclosure.
No. 3 – Home Surrender Scheme: In this scenario, the foreclosure scammer tricks the victim into giving up ownership of their home. The scammer promises to bring the mortgage up to date and then set up an easy payment plan that will allow the victim to stay in their home. The victim is tricked into signing paperwork that turns over the title to the scammer, who is then able to buy the home from the lender at a ridiculous price. Once the scammer owns the home, the victim has no choice but to pay extremely high rent in order to remain in the home.
No. 4 – My Lender Violated the Law Scam: In this type of scam, the scammer, for a large fee paid up front, offers to “review” your loan documents from your closing and guarantees to find you a violation of one of the myriad of laws that govern lenders of mortgage loans. They typically respond with what is usually a very minor technical violation of typically the Truth in Lending Law (the one that requires the APR (annual percentage rate) disclosure be given to the Borrower) and some document for the Borrower “victim” to file on their own in the county deed records reciting they were victimized by their lender and therefore somehow the lender is not allowed to foreclose on the debt. This of course is garbage and doesn’t do anything except separate the Borrower from their hard earned money.
Question: So what are some signs that might help you identify a potential foreclosure scam artist?
Scotty: Don’t ever trust a solicitation over the phone, mail or your computer by someone promising to help you avoid foreclosure. Legitimate foreclosure consultants typically don’t solicit their services in this manner. You must go to them.
Many of these foreclosure scammers claim to be affiliated with the government. Be wary of paying any fees before a service is performed.
Biggest tip-off: You are told to cease all contact with your mortgage lender.
Finally, don’t allow your fears of losing your home to cloud your judgment. Use common sense. Don’t let your emotions sway you to fall for a foreclosure-rescue offer that is too good to be true.
Question: What are some other ways to avoid a foreclosure scam?
Scotty: Stay in touch with your mortgage lender. Your lender may be able to help you refinance or restructure your loan. But if you avoid all contact, you may lose out on this opportunity – and your home.
Research and learn all you can about the foreclosure process. Know what to expect. The more you know about the foreclosure process, the less likely you are to fall for a scam artist.
Seek assistance from a certified foreclosure counselor or agency. You can find help from the federal HUD (Housing and Urban Development Department) at www.HUD.gov. You can also look for a counselor certified by the National Foundation for Credit Counseling (www.nfcc.org).
Finally, if you feel you may have already been scammed, seek assistance from an attorney who is experienced in real estate and foreclosures. Or you can go directly to local and state authorities such as the police or district attorney.