Desperate homeowners seeking to retain their homes are a common target for scam artists looking to take advantage of a difficult situation. While there are legitimate programs out there, they are few and far between.
The reality is that when you have few options available to you, even bad ones start to look good. But a scam is always a bad option, so it’s important to learn how to identify them before you find yourself in an even worse position.
Are homeowners protected?
To some extent they are. America’s consumer protection agency, the Federal Trade Commission (FTC), has taken steps to protect homeowners. The Mortgage Assistance Relief Services (MARS) Rule — sometimes referred to as Regulation O — prohibits companies from collecting fees until homeowners get an offer of relief from their lenders and accept the offer.
The MARS Rule means that consumers don’t have to pay for results they don’t receive. This can be a homeowner’s saving grace during the foreclosure process.
How to recognize a scam
Foreclosure scam artists typically put pressure on homeowners facing foreclosure. Language such as “Act now!” or “Don’t wait!” may be prominent in their ads. Below are some of the more common scams you might discover:
Phantom counseling or phony help
For sizable fees, these scam artists promise to negotiate deals with lending institutions to save homes. Some claim to be lawyers or have an association with legitimate law firms. They’ll advise you not to contact your lender, credit counselor or attorney. They say that once you pay their fee, they will handle all the details. They won’t take your calls once they cash your check.
Most homeowners can already negotiate with their lenders in the hope of saving their homes. While not all lenders will do this, foreclosures are expensive for lenders. They may agree to a refinancing plan in order to save themselves the cost of the foreclosure process.
These scammers portray themselves as forensic loan auditors. For a fee, they claim that experts or attorneys will review your mortgage documents. They say that they may determine that your lender failed to comply with the law. But there is no evidence that these alleged audits will uncover anything to help you secure any mortgage relief.
These con artists tell homeowners that by surrendering the titles to their houses, they can live there as renters until they can afford to repurchase the homes. Then, the new owners jack up the rent until you can no longer afford to live there. Alternatively, they increase the fees so much that buying it back is now impossible. Ultimately, you wind up losing your home.
Slow down and think these things through before promising payment to anyone. There are may legitimate avenues to explore that may bring you the foreclosure relief you seek.