Foreclosure Scams to Watch Out For!

The Federal Trade Commission (FTC) announced six new lawsuits brought against companies accused of running foreclosure rescue and loan modification scams.  The suits are the latest action federal and state authorities are taking in “Operation Stolen Hope,” which to date includes 118 actions by 26 federal and state agencies, including a total of 28 FTC lawsuits filed against alleged fraudulent firms. According to the FTC, foreclosure “rescue” professionals identify targets by researching public information about foreclosures. They often send a personalized letter to distressed homeowners and they may also rely on public advertising. They promise they will save your home and may promise they can negotiate a better deal with your lender. But there’s always a catch. Often these firms want you to pay an upfront fee. Sometimes scam artists require you to make payments directly to them while they negotiate with your lender. In both cases, once the money leaves your hands, the scammer disappears.  Other tactics include having you sign documents that surrender the title of your home to the scammer, or asking you to “rent-to-buy” your own home after surrendering title.

The appeal of this scheme is that you are told you can remain in your home as a renter and repurchase it within a few years. But the terms of the deal are usually unfavorable for you, and the scam artist walks off with most of the home’s equity or worse — if they default on the loan, you get evicted.  A variation on the theme occurs when a scammer says they have a buyer for the home, and asks you to transfer the deed. The scammer then rents out the home and keeps the profits while the foreclosure proceeds. Even worse, you are still responsible for the unpaid mortgage, because transferring a deed doesn’t dismiss a mortgage obligation.  A final tactic is when a scam artist files a bankruptcy case in your name, sometimes without you even knowing about it. The scam artist keeps the fee for his “services” during a temporary pause in home foreclosure proceedings, while you end up with the fallout from having a bankruptcy on your credit history.