Foreclosure Fix-it Scams
LA Times has an article about the FTC starting to crack down on what are referred to as “foreclosure fix-it” scams. They include a list of common warning signs, which follows:
1. Guarantees to stop your foreclosure, irrespective of how much you owe or how much income you have to resolve your unpaid bills. Most major lenders and the servicing companies they employ are willing to negotiate loan modifications to cut payments or reschedule debts, but if you don’t have the income to handle even lower payments, foreclosure is hard to avoid. Any company that spins you a different story is probably a scam.
2. Requires you to pay money upfront before any services have been rendered. Federal law specifically prohibits foreclosure rescue firms from collecting any money in advance, but Internet-based companies often ignore those rules.
3. Tells you to avoid contacting your lender or servicers directly, delegating all negotiating duties to the firm. In fact, borrowers themselves tend to be in the best position to speak with servicers about their situations and possible alternatives to foreclosure, including short sales.
4. Instructs you to send mortgage payments to its office address instead of to your lender or servicer. Such firms not only take your money with little or no services rendered, but dig you into a deeper financial hole with your lender.
5. Asks you to turn over the title or deed to the property so that the company can be in a stronger position to deal with the lender. That’s giving your house away and losing all of your rights along with any remaining equity.
Foreclosure Scams
McClatchy Newspapers has a story about foreclosure scams in California’s San Joaquin Valley illustrating one of the problems when an area has significant amounts of foreclosures.
Homeowners beware, just ask Fresno resident Patricia Ireland. A temporarily laid-off Internal Revenue Service employee, Ireland was scrambling to meet her mortgage payments recently. Out of the blue, a company called to offer help. For a $2,500 fee, Ireland was told the company and its Irvine-based lawyers would re-negotiate the mortgage. Desperate, Ireland paid a $500 down payment. Then she found the fine print. “When I read the papers they sent me, they said that until they got the full $2,500, they wouldn’t talk to my mortgage company,” Ireland said.
With the increased number of homeowners facing foreclosure, it’s becoming a larger opportunity for the scammers. There are legitimate companies in the business of foreclosure prevention, if you are having trouble making your mortgage payments, take the time to understand what assistance companies offer, and research the company background. If a company doesn’t have an office, doesn’t have any business rating and has only been in business for the last year or so, you really want to think about whether that’s someone you’ll trust with your largest investment.
