Protect Your Pockets Series
Avoiding Common Foreclosure Fraud Schemes
(originally published November 2008)
Purchasing a home is one of the biggest investments a person can make. Owning a house can provide a sense of accomplishment and a feeling of security. As a result, the thought of losing one’s home can be daunting. The truth of the matter is, your home can be seen as a promising investment for swindlers willing to take advantage of you in this time when making your payments may be difficult.
Across the nation, the number of people defaulting on their mortgages and facing foreclosure is at an all time high. Foreclosures are typically the result of a homeowner missing three or more mortgage payments consecutively. While homeowners may feel overwhelmed with their payments, they often wait until it’s too late to ask for help.
Resources are available to assist homeowners, but they must be careful where they turn for help. Fraudsters often target desperate homeowners through foreclosure rescue scams. So-called foreclosure “rescue” agencies or foreclosure assistance firms claim they can save your house but rarely have your best interest in mind.
“Rescue” agencies frequently offer to negotiate a repayment schedule with your lender for a fee. After collecting your money, they disappear and you are left with a home still in foreclosure. To avoid phantom help schemes like this, never pay upfront fees, and always deal directly with your lender.
In another common scheme, scam artists will offer to buy your home but let you remain in it as a renter, promising to sell back your home when you are in a better position to afford it. Once the title is transferred, the scammer will typically take out a second loan to cash out the house’s remaining equity and then vanish. Signing over the deed does not transfer your obligation to the original mortgage, however, and you are left once again facing foreclosure.
Sometimes scam artists are able to get homeowners to sign over the title of their house without even realizing it. In these bait-and-switch schemes, homeowners sign intricate legal papers under the guise that they are receiving a “rescue” loan to make their mortgage current. In actuality, the documents contain clauses surrendering the deed to their house. Homeowners should take the time to carefully review all documents before signing them.
Homeowners can avoid foreclosure “rescue” scams by being cautious and seeking assistance from legitimate sources. Ignore unsolicited help from so-called foreclosure “rescue” agencies, especially if they insist on being your main contact throughout the foreclosure process. Instead, talk directly to your lender, who may be willing to work with you in negotiating a repayment schedule.
If the foreclosure agency advertises itself as a mortgage broker, call my office’s Securities Division at 1-800-223-8791 or check our online database at http://www.indianainvestmentwatch.com/ to make sure they are licensed.
Finally, utilize HUD-approved counseling agencies in Indiana who provide free advice on handling foreclosures. You can view a list of these agencies at www.hud.gov/foreclosure. Other local resources include the Indiana Foreclosure Prevention Network, created to provide free and unbiased information for Hoosiers facing foreclosure. Call 1-877-GET-HOPE today to find out how the Indiana Foreclosure Prevention Network can help you.
- Search database for licensed loan brokers
- Contact the Securities Division