With millions of Americans facing foreclosure, scam artists are devising plans to rip off unsuspecting homeowners.
As with any purchase or business transaction, the consumer needs to be aware that con- artists, frauds, and criminals are lurking and looking to score a quick buck.
The Federal Bureau of Investigation, the Office of Housing and Urban Development, the Office of the Comptroller of the Currency, the Office of Thrift Supervision, the FDIC, the United States Justice Department and numerous state Attorney Generals encourage consumers to be aware of loan modification and foreclosure prevention scams.
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After much research, we have found numerous schemes and here are just a few to look out for.
If a mortgage modification / foreclosure prevention company is asking you to pay up front fees, you need to be cautious. This has been outlawed in many states, and state legislatures passed these laws for two reasons.
First of all, most elected officials are attorneys. Needless to say, they want to look out for their colleagues and their profession. Thus, they want to corner the market on mortgage modifications. By enacting legislation that hinders competition, they obtain a big advantage. In this instance, attorneys can collect upfront loan modification fees but non-licensed attorneys can not.
Secondly, state legislatures want to protect the consumer from fly-by night and unscrupulous companies that want to take advantage of a homeowner having financial difficulties.
I have seen far too many clients that got scammed by a law firm and/or loan medication organization. The consumer paid $3,000-$5,000 up front in hopes of obtaining a successful mortgage modification, only to be thousands of dollars poorer with no loan modification in sight.
Another scam is when a third party asks that you sign over the Deed to your house. Do not do this. If you do, you are no longer the owner of the property, and you can be evicted by the new owner.
If a lender, mortgage broker, attorney, real estate agent or any other third party asks you to execute a Deed with the promise that they will payoff your mortgage, you need to run away as quickly as possible.
Do not do a "short sale" without the assistance of a licensed real estate broker and/or agent. There are a lot of hidden issues that need to brought to light before one embarks on this journey. Make sure you also obtain written approval from your lender.
If someone promises that they can get your mortgage balance reduced and/or cancelled, your antenna should go up. There is a new "principle reduction" mortgage product out on the market, but this has nothing to do with a loan modification.
Another alarming swindle is when a buyer promises to purchase your home and pay your mortgage for you. Assumable mortgage have pretty much become a thing of the past. In fact, I believe only VA or FHA mortgages are still assumable. In these cases, the note holder will actually take the seller off the mortgage and put the buyer on the mortgage note. Any other way of doing this could be a financial disaster. If someone wants to buy your home, make sure that they have their own financing.
I also think it is very important to verify whom you are doing business with. In my opinion, you do not want to do business with any loss mitigation company and/or law firm that is not approved and/or recommended by the BBB (Better Business Bureau).
In closing, please take precautions when entering into any financial transaction. If you feel that you have been scammed or taken advantage of by someone using one or more of the above referenced tactics, please contact the Attorney General of your home state.
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