Real Estate Articles

REALTOR®: Troubled Homeowners Need to be Aware of Foreclosure Rescue Scams

Scam artists are preying on the vulnerability of desperate homeowners. These scam artists identify themselves as foreclosure rescue companies or foreclosure assistance firms, and claim they can help you save your home. Instead, they make a quick profit through fees or mortgage payments they collect from you.

The Federal Trade Commission seeks to prevent fraudulent, deceptive, and unfair business practices in the marketplace and advises troubled homeowners to avoid any business that:

* guarantees to stop the foreclosure process – no matter what your circumstances.
* instructs you not to contact your lender, lawyer, or credit or housing counselor.
* collects a fee before providing you with services.
* accepts payment only by cashier’s check or wire transfer.
* encourages you to lease your home so you can buy it back over time.
* tells you to make your mortgage payments directly to it, rather than your lender.
* tells you to transfer your property deed or title to it.
* offers to buy your house for cash at a fixed price that is not set by the housing market at the time of sale.
* offers to fill out paperwork for you.
* pressures you to sign paperwork you haven’t had a chance to read thoroughly or that you don’t understand.

Here are foreclosure rescue scams you should avoid:

1. Phony Counseling or Help
The scam artist tells you he can negotiate a deal with your lender to save your house, if you pay a fee first. You may be told not to contact your lender, lawyer, or credit counselor, and to let the scam artist handle all the details. Once you pay the fee, the scam artist takes off with your money. The scam artist may also want you make all mortgage payments directly to him while he negotiates with the lender. In this case, he may collect a few months of payments before disappearing.

2. Bait-and-Switch
The scam artist may make you believe you’re signing documents for a new loan in order to make your existing mortgage current, but instead, you’ve signed documents that surrender the title of your house to the scam artist in exchange for a “rescue” loan.

3. Rent-to-Buy Scheme
The scam artist insists you surrender the title as part of a deal that allows you to remain in your home as a renter, and to buy it back during the next few years. You may be told surrendering the title will permit a borrower with a better credit rating to secure new financing. The terms of these deals usually are so burdensome you lose your home, and the scam artist walks off with all or most of your home’s equity. Worse yet, when the new borrower defaults on the loan, you’re evicted.

Another variation of this trick is the scam artist raises the rent over time so you can’t afford it. After missing several rent payments, you, the former homeowner, are evicted, leaving the “rescuer” free to sell the house.

In a similar equity-skimming situation, the scam artist offers to find a buyer for your home, but only if you sign over the deed and move out. The scam artist promises to pay you a portion of the profit when the home sells. Once you transfer the deed, the scam artist simply rents out the home and pockets the proceeds while your lender proceeds with the foreclosure.

4. Bankruptcy Foreclosure
The scam artist promises to negotiate with your lender or to get refinancing on your behalf if you pay a fee up front, but instead, he pockets the fee and files for bankruptcy in your name, without your knowledge. If this happens, you could lose the money you paid to the scam artist and your home. A bankruptcy stays on your credit report for 10 years, and can make it difficult to obtain credit, buy a home, or sometimes get a job.

If you feel you have become a victim to a foreclosure rescue scam, contact the FTC to file a complaint, or to get free information on consumer issues. Call toll-free, 1-877-FTC-HELP (1-877-382-4357), or visit www.ftc.gov.

If you are having trouble paying your mortgage, the Silicon Valley Association of REALTORS® advises you to contact your lender immediately. You can also call the Homeownership Preservation Foundation 24/7 toll-free hotline at 1.888.995.HOPE, which provides free, bilingual, personalized assistance to help at-risk homeowners avoid foreclosure.

The Silicon Valley Association of REALTORS® (SILVAR) is a professional trade organization representing over 4,000 REALTORS® and Affiliate members engaged in the real estate business on the Peninsula and in the South Bay. SILVAR promotes the highest ethical standards of real estate practice, serves as an advocate for homeownership and homeowners, and represents the interests of property owners in Silicon Valley.

The term "REALTOR®" is a registered collective membership mark which identifies a real estate professional who is a member of the National Association of REALTORS® and who subscribes to its strict Code of Ethics.

Variations of this article have appeared in local area newspapers.

For further information, please contact Rose Meily at SILVAR Public Affairs, e-mail , or phone (408) 200-0109.

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