Consumers:
Consumer Tips > Foreclosure Rescue & Loan Modification Scams:
Be Careful or You Could Lose Your Home
As the number of foreclosures grows, so too does the number of scams and schemes involving mortgage rescue plans. You may see claims similar to the following:
“Stop Foreclosure Now!”
“We have special relationships with most banks that can speed up case approvals.”
“We Can Save Your Home. Guaranteed!”
“We stop foreclosures every day. We can stop yours this week!”
Once they have your attention, they may use a variety of tactics to get your money. The end result could be that you lose your home.
These companies claim they can help you save your home. They may even offer a money-back guarantee. Unfortunately, they can leave you with nothing to show for the money you spent.
These companies use half truths, misstatements, and outright lies to sell services that promise relief they know they cannot deliver.
Their goal is to make a quick profit through fees or mortgage payments they collect from you, but do not pass on to the lender.
Sometimes, they assume ownership of your property, and then, once it’s too late to save your home, they take the property.
Where do they get your information?
These companies can get your name from a variety of places. Some may get your name from public foreclosure notices in newspapers, on the Internet, or from public files at local government offices. Once they have your name they may send a personalized letter to your home, or drop a notice off on your front door. Others use ads on the Internet, television, or in the newspaper, or by posting flyers in public places.
Here are some of the tactics used in this type of scam:
Phony Counseling
The con-artist says that he can negotiate a deal with your lender to save your house. He will want an up-front fee for his service and may want you to keep paying the fee monthly until he completes the job. You may be told to stop contacting your lender, lawyer, or credit counselor, and to let him handle all the details. Once you pay the fee, the scam artist takes off with your money.
Sometimes, the scammer asks that you make all mortgage payments directly to him while he negotiates with the lender. As you might guess, your lender does not always see the money, and you fall further behind on your mortgage, causing more problems.
Bait-and-Switch
Always read what you are signing. The scammer tells you the documents are a new loan to make your existing mortgage current, but in reality you’ve signed documents that surrender the title of your house in return for a small loan worth less than the value of your home.
Rent-to-Buy Scheme
The scammer offers you a deal that allows you to rent your home with the option to repurchase in the next few years. Often the con-artist will tell you that surrendering the title will permit a more credit worthy borrower to secure new financing. Most of the time the terms under which you could repurchase your home are virtually impossible to meet. The scammer may try raising the rent over time until the former homeowner can no longer afford it. You could be evicted from your own home, leaving the conman free to sell your house.
In another variation, you are told that if you sign over the deed and move out, the conman will find a buyer for your home. You are promised a portion of the profit when the home sells. However, once you sign over the deed you no longer have control of the property; the con-artist simply rents out your home, keeps the money, and waits until your lender forecloses.
Remember, you are still responsible for your mortgage even if you sign over your deed to someone else. If the house sells for less than what is owed on the mortgage, you are still liable for the remaining debt.
Bankruptcy Foreclosure
Some con-artists promise to negotiate with a lender for an upfront fee, but instead pocket the money and file a bankruptcy case in your name. The scammer may not even tell you the bankruptcy has been filed.
Filing a bankruptcy petition can temporarily stop a home foreclosure. Bankruptcy is complicated and should not be undertaken without legal assistance. If you fail to meet your legal obligations under the Bankruptcy Code, the bankruptcy judge will dismiss the case and the foreclosure proceedings will continue. You could lose your money and your home. Also, bankruptcy filings stay on your record for 10 years, and can make it very difficult to obtain credit.
Red Flags
Homeowners should be careful about doing business with any company that:
- Calls itself a "mortgage consultant," "foreclosure service," or "loan modification service."
- Offers a guarantee to stop the foreclosure process.
- Collects a fee before providing any services, or collects a monthly fee until services are complete. In most cases charging such fees violates Arkansas law.
- Accepts payment only by cashier’s check or wire transfer.
- Encourages you to lease your home so you can buy it back over time, or tells you to transfer the title to them, so that you can buy it back later.
- Tells you to make your mortgage payments directly to it, rather than your lender
- Offers to buy your house for cash at a fixed price that is not set by the housing market at the time of sale
- Uses high-pressure tactics, like pressuring you to sign paperwork you haven’t had a chance to read thoroughly or that you don’t understand.
- Instructs you not to contact your lender, credit counselor, or lawyer. They may say they will "handle all the details."
Where to Find Legitimate Help
If you’re having trouble paying your mortgage or you have gotten a foreclosure notice, contact your lender immediately. Most mortgage companies have programs to assist homeowners in financial distress. You may be able to negotiate a new repayment schedule. Most lenders do not want to foreclose on a home; it costs them money.
For other foreclosure prevention options the Federal Trade Commission has some helpful tips:
http://www.ftc.gov/bcp/edu/pubs/consumer/homes/rea04.shtm.
There are organizations that offer free or low cost help to homeowners having trouble. You can contact the U.S. Department of Housing and Urban Development (www.hud.gov) or the housing authority in your state, city, or county for help in finding a legitimate housing
counseling agency nearby. Additionally, the nonprofit Homeownership Preservation Foundation (HPF) at 888-995-HOPE or www.hopenow.com may be able to provide some assistance.
When choosing a counselor, beware of anyone charging large up-front fees or guaranteeing you a loan modification. If you are already in trouble and they want to help, they should not charge you high fees or make you any guarantees of success.
If you any questions about a company offering foreclosure rescue services you should contact the Attorney General's Office at (501) 682-2007 or 1-800-482-8982, or the Arkansas Securities Department at (501) 324-9260 or (800) 981-4429.
Contact Us
Consumer Protection Division
501-682-2341
800-482-8982 (statewide)
501-682-8118 (fax)
consumer@arkansasag.gov
