Tag Archives: foreclosure scams

Scam Artists & Homeowners: What They’re Doing and How to Protect Yourself, Part II

In the first part of this two-part series we discussed the various ways that scammers try to take advantage of homeowners facing foreclosure and other banking problems. This part addresses ways that you can protect yourself, tell-tale signs you should watch out for and ways to truly seek assistance.

The Mortgage Assistance Relief Services Rule

The Mortgage Assistance Relief Services (MARS) Rule makes it illegal for companies to collect any fees until a homeowner has actually received an offer of relief from his or her lender and accepted it. The FTC’s MARS Rule gives the homeowner certain rights and sets out requirements for people who sell mortgage assistance relief services.

Please Note the Following Per the FTC:

You don’t have to pay any money until the company delivers the results you want. It’s illegal for a company to charge you a penny until:

  1. it’s given you a written offer for a loan modification or other relief from your lender; and
  2. you accept the offer. The company also must give you a document from your lender showing the changes to your loan if you decide to accept your lender’s offer. And the company must clearly tell you the total fee it will charge you for its services.

Companies must disclose key information. The Rule requires companies to spell out important information in their advertisements and telemarketing calls, including that:

  • They’re not associated with the government, and their services have not been approved by the government or your lender;
  • Your lender may not agree to change your loan;
  • If a company tells you to stop paying your mortgage, it also has to warn you that doing so could result in your losing your home and damaging your credit.
  • Companies can’t tell you to stop talking to your lender. You should always feel free to contact your lender directly to see whether they can offer you additional options. Companies that tell you otherwise are breaking the law.

If a company doesn’t follow these rules, it could be trying to scam you.

The FTC Also Notes the Following

Some lawyers may offer to help you get a loan modification or other mortgage relief. Under the MARS Rule, lawyers can require you to pay an upfront fee, but only if:

  • They’re licensed to practice law in the state where you live or your house is located;
  • They’re providing you with real legal services;
  • They’re complying with state ethics requirements for attorneys; and
  • They place the money in a client trust account, withdraw fees only as they complete actual legal services, and notify you of each withdrawal.

Unfortunately, some people advertising mortgage assistance relief services falsely claim to be getting you help from lawyers. So before you hire someone who claims to be an attorney or claims to work with attorneys, do your homework.

Get the name of each attorney who’ll be helping you, the state or states where the attorney is licensed, and the attorney’s license number in each state. Your state has a licensing organization – or “bar” – that monitors attorney conduct. Call your state bar or check its website to see if an attorney you’re thinking of hiring has gotten into trouble. The National Organization of Bar Counsel has links to your state bar: www.nobc.org/Bar_Associations_and_Disciplinary_Authorities.aspx

Ask relatives, friends, and others you trust for the name of an attorney with a proven record of getting help for homeowners facing foreclosure.

Beware of attorneys who make bold promises or try to pressure you into hiring them.

Warning Signs Per the FTC

If you’re looking for a loan modification or other help to save your home, avoid any business that:

– guarantees to get you a loan modification or stop the foreclosure process – no matter what your circumstances;

– tells you not to contact your lender, lawyer, or housing counselor;

– claims that all or most of its customers get loan modifications or mortgage relief;

– asks for an upfront fee before providing you with any services (unless it’s a lawyer you’ve checked out thoroughly);

– accepts payment only by cashier’s check or wire transfer;

– encourages you to lease your home so you can buy it back over time;

– tells you to make your mortgage payments directly to it, rather than your lender;

– tells you to transfer your property deed or title to it;

– offers to buy your house for cash for much lower than the selling price of similar houses in your neighborhood; or

– pressures you to sign papers you haven’t had a chance to read thoroughly or that you don’t understand.

I hope that these tips and warnings help you be more circumspect in the face of scam artists and other dishonest people and companies looking to cheat you out of your home and property. However morally reprehensible, these people are out there, and we need to work to protect ourselves from them.

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Scam Artists & Homeowners: What They’re Doing and How to Protect Yourself, Part I

As part of National Fraud Prevention month, I’d like to take this opportunity to speak with you about an unfortunate type of fraud that is challenging desperate homeowners.

Anyone facing the possibility of losing his or her home to foreclosure is distressed and worried. Unfortunately, scam artists look for these opportunities to prey on the fears of desperate homeowners.  This series of posts should help you know what to look for and how to avoid being their next victims.

Tactics of Scam Artists

The companies or individuals involved in an enterprise designed to scam homeowners may use a variety of tactics to find homeowners in distress. One avenue is through public foreclosure notices in newspapers and on the internet or through public files at local government offices. Once the names are located, some scam artists will send personalized letters to homeowners. Others will try to reach homeowners through ads on the internet, radio or television or radio, in newspapers, posters and at bus stops. They may send out flyers and business cards or even arrive at the homeowner’s front door.

In one type of scam companies or individuals make promises to the homeowner stating that they can change the terms of the loan, reduce the monthly mortgage and save the home from foreclosure.  Such companies actually tell homeowners that they are able to save their homes and even may offer a money-back guarantee. Some companies have their employees call and tell the homeowner that they are affiliated with the lender or the government and offer the help of attorneys or real estate agents. This is just another way these con artists promise relief and fail to deliver, leaving the homeowner in a worse financial state.

Some scam artists tell the homeowner to pay them a fee for negotiating  a deal with the lender to reduce mortgage payments and prevent foreclosure. Some may claim to be attorneys or representatives of a law firm. They may tell the homeowner not to contact their lender, lawyer, or credit counselor based on a promise that they will handle all the details once they receive the fee. Once the homeowner pays the fee, the scam artist stops returning the homeowner’s calls and disappears with the money.

Another tactic is the use of telephone calls initiated by people pretending to be credit counselors.  These people often insist that mortgage payments be made directly to them while they negotiate with the lender. They may collect a few months of payments and then disappear.

Pretending to Be an Auditor

Some scams involve people posing as loan auditors or foreclosure prevention auditors (for example), and requiring an upfront fee for an attorney or other expert to review mortgage documents to determine if the lender complied with the law. These so called auditors may tell the homeowner that they can use the attorney’s report to avoid foreclosure, facilitate a loan modification or reduce the amount of the loan.  Inevitably, the scammer’s promises do not materialize, and the fraudster disappears with the money.

Other Schemes

Scam artists may use a rent-to-buy scheme and tell the homeowner to give up the title to his house as part of a deal that allows the homeowner to stay in the home as a renter and buy it back later. The con artist will say that surrendering the title will actually benefit the borrower with a better credit rating, qualify the homeowner for new financing and save the home.   Ultimately, the homeowner loses the house, and the scam artist disappears with the money the homeowner paid.  This scheme leaves the homeowner without a title to his home and more likely than not, facing eviction. In a similar hustle, the scam artist raises the rent over time so the homeowner cannot afford it. The homeowner starts missing payments, is evicted and the scam artist sells the house.

Some schemes involve an offer to find a buyer for the homeowner, but only if the homeowner signs over the deed and moves out. The con artist promises to pay the homeowner a portion of the profit when the home sells. After the homeowner transfers the deed, the fraudster rents the home and pockets the proceeds and the homeowner’s lender proceeds with foreclosing on the home. The homeowner loses the home and is responsible for the unpaid mortgage because the homeowner transferred only the title but not the debt.

Bait and Switch

In a bait-and-switch scam, con artists give you papers they claim you need to sign to get another loan to make your mortgage current. But buried in the stack is a document that surrenders the title to your house to the scammers in exchange for a “rescue” loan.

In Part II of this series, I’ll share a variety of FTC recommendations, what you should watch out for and how to make sure that you’re getting what you bargained for.

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