Foreclosures
Categorically speaking there are two common scams that have become quite prevalent in the past few years. And here we are going to break down how they work and how to avoid them:
Flat-Rate "Rescue" Fee
These are the more common scams that you may see or have seen in recent times, especially if you are already in pre-foreclosure. Once you are listed as a borrower in pre-foreclosure these lurkers will contact you via mail or phone to solicit their services. They claim that for a "low" flat rate, they will be able to begin the process of getting you out of pre-foreclosure, and returning your life back to normal. But more often than not the only thing that will happen is a nice big chunk of change will be taken from your wallet.
The rates usually begin around $300 and go as high as thousands of dollars. These people pose as counselors or mediators, claiming that they will speak on your behalf to your lender in order to come to a loan remodification agreement. Once you've paid that up front fee and they've successfully cashed the check, the alleged "professional" just disappears. Undoubtedly there are those who truly do provide this service of loan remodification, however they do not ask for an upfront fee. The main reason is because there is no guarantee that the lender will accept a proposed loan modification. It takes countless hours of back and forth in order to come to a middle ground and at the end of this article we will suggest some organizations and resources where you can find trustworthy individuals to help you negotiate with your lender. Although remember sometimes it is best if you handle it yourself - lenders do have representatives that work directly with you instead of a middle man to determine the best solution in solving your mortgage woes.
Rent-to-Buy "Rescue" Strategy
This scheme is a bit more complex and detailed, which also succeeds in making the process seem all the more legitimate. With this scheme, the homeowner works with a property management or real estate development company. This company helps homeowners refinance the terms on their loan using the company's name and credit so that the future interest rate and loan program is more reasonable for the homeowner. The trade off is that the homeowner will continue to live there while making rental payments every month that goes towards the loan.
However what essentially takes place is the home is refinanced under the name of the company, which also essentially means that the title or ownership of the property is given to the company. The homeowner is therefore nothing more than a tenant. The company usually profits by taking the remaining equity out of the house or mortgage payments without paying the new loan, leaving the home to go into foreclosure anyway. In the end the home goes into foreclosure but the borrower no longer has any right to stay in the home since they no longer technically own the home according to legal and title records.
With foreclosures still on the rise and the financial market in a downward spiral, foreclosure scams will most likely be on the rise in the coming months. Remember:
- If someone guarantees you anything from the get-go, be very wary.
- If someone demands an upfront payment, be very wary.
Here are some resources to visit if you are in need of foreclosure help:
HOPE National Helpline or NeighborWorks @ 888-995-HOPE
HUD Housing Counselor @ 800-569-4287
