If you have fallen behind on your mortgage payments and your home is in foreclosure or default, be aware that you and your home may become targets for home equity theft or foreclosure rescue fraud scams.
The perpetrators of these scams claim they can solve your debt problems and stop your foreclosure. They then use deceptive tactics to obtain ownership of your home for a fraction of its market value and leave you homeless yet still the holder of the mortgage that is still in foreclosure.
If you are having problems making your mortgage payments or are in default or foreclosure, contact your lender immediately. Lenders generally prefer to work out a new payment plan, than actually go through the complex process of foreclosure.
If you are facing foreclosure, you should know your rights under the law and be aware of the signs that someone is attempting to take advantage of you.
How the scammer finds you
When your home enters foreclosure, your lender files a record of foreclosure – called a “lis pendens” – with the local county clerk’s office. The county clerk’s office publishes a list of all recorded foreclosures in the county, including the address, on a weekly basis in local newspapers. Scammers obtain these lists to find vulnerable homeowners.
The scammer will contact you by mail, by telephone or even by knocking on your door, and offer you some sort of financial solution to your foreclosure or default. Sometimes these scammers will target entire neighborhoods or cities by posting advertisements and fliers marketing their services. In these offers, they claim to be able to “stop foreclosure,” “save your home” or get you “quick cash for your home.”
How the scammer deceives you
These predators try to convince you that they want to “rescue” you from foreclosure and offer you one of any number of fraudulent “solutions,” including:
- Buying your home so that you can pay off your mortgage and then live in the house as a renter, at a low rent, until you can afford to buy back the home
- Paying your mortgage in exchange for temporarily holding the deed to the home, allowing you to live in the home as a renter, at a low rent, until you can afford the mortgage payments again
- Asking you to put the deed to your house in another person’s name (who allegedly has better credit than you do) so that the scammer can find you new and more affordable financing
- Making a low-cost loan to you so that you can pay off some or all your mortgage, and then pay back the scammer, who holds the deed to the house as collateral
- Offering to negotiate on your behalf with your lenders for reduced interest rates and debt forgiveness.
Once you agree to one of these “solutions,” the scammer then steals your home or your equity by using deceiving practices such as:
- Convincing you to sign a contract that seems to be for the legitimate sale of your home to the scammer, but just gives over your home’s deed to the scammer with no requirement for any payment to you
- Convincing you to sign a contract with a buyback agreement that states you must pay an enormous fee when you buy your home from the scammer, or states you must buy back the home within an extremely short period of time, making it impossible for you to ever save enough money to do so
- Charging you extremely high interest rates and fees on what was promised to be a “low-cost” loan with which you could pay off your mortgage, and then taking the deed to your home when you default on that loan
- Actually buying your home from you, but then charging you huge hidden fees that suck up much or all of the proceeds of the sale
- Charging you huge fees for “negotiating work” with the lender that is either never done, or that you could have done
- Lying to you about the length of time you have before your house is put up for foreclosure auction, pressuring you to sign documents quickly and without reading them; and refusing to allow you to speak to your lender or lawyer.
Ultimately, the scammer has either bought your home for a fraction of its legitimate price or has stolen the deed to your home without a penny of payment, leaving you homeless but still responsible for the mortgage, which is still in foreclosure! In some cases, you might keep ownership of your home, but pay so many fees or so much interest that you are broke and have no money for future payments.
How to avoid being scammed
Never do business with anyone who calls you, mails you, or knocks on your door with offers to help fix your foreclosure or default. Do not respond to advertisements and fliers making similar offers.
If you are having problems making your mortgage payments or are in default or foreclosure, contact your lender immediately. Lenders often prefer to work out a new payment plan, rather than go through the foreclosure process.
If you are facing foreclosure, contact a certified housing counselor. Housing counselors can help you and, unlike scammers, they can give you advice on your options and resources, help you find free legal services, and help you negotiate better financing for your loan.
Never sign any papers or contracts and never enter into any agreement without first consulting your own lawyer – not a lawyer provided by the individual offering to “help.”
The information in this article was obtained from various sources not associated with Adirondack Bank. While we believe it to be reliable and accurate, we do not warrant the accuracy or reliability of the information. Adirondack Bank is not responsible for, and does not endorse or approve, either implicitly or explicitly, the information provided or the content of any third-party sites that might be hyperlinked from this page. The information is not intended to replace manuals, instructions or information provided by a manufacturer or the advice of a qualified professional, or to affect coverage under any applicable insurance policy. These suggestions are not a complete list of every loss control measure. Adirondack Bank makes no guarantees of results from use of this information.
Article written by the New York State Department of Financial Services