It’s no coincidence that an increase in foreclosures is accompanied by an increase in mortgage scams. You have probably heard ads on the radio or seen fliers that read something along the lines of, “If you’re having trouble with your mortgage, we can help! Sign up for mortgage aid!” But you should be cautious: if it sounds too good to be true, it probably is.
The majority of these supposed foreclosure “rescuers” are actually sleazy predators, according to former Harvard Law School professor and current Senator from Massachusetts, Elizabeth Warren. She calls what they offer a “cement life jacket.”
Before you’re aware that you’re being taken advantage of, these foreclosure scam artists would have already acquired your home for a fraction of its fair market value. They may also transfer title into a trust that will allow them to resell your property at a substantial profit while you’re still legally obligated to make the mortgage payments.
Most Common Scams
In general, there are three categories of foreclosure scams.
First, the rescuer offers to prevent foreclosure by charging fees for making phone calls or filing paperwork that the homeowner can easily complete. The rescuer doesn’t make the phone calls or file the necessary paperwork and the homeowner loses the home. This type of scam gives homeowners a false sense of hope that their home can be saved and also prevents them from seeking alternative and reputable help.
Second, the scammer convinces the homeowner to transfer title into the scammer’s name and promises that the homeowner can rent the home and, when more capable, buy back the property. The terms of this agreement are so confusing and impossible to satisfy that the homeowner is never able to buy back the home. As a result, the homeowner loses possession and title and the “rescuer” is rewarded with the equity in the home.
Third, the scammer talks the homeowner into signing documents to bring the mortgage current. Instead, the homeowner is actually surrendering his or her ownership. In this type of scam, the homeowners typically don’t know they’ve been scammed until they’re evicted.
Other foreclosure scams have also been reported. A lawsuit from a Wells Fargo whistleblower revealed that the bank routinely foreclosed on borrowers without the proper documentation. The bank may have lost the contract, deed, or documentation placing a lien on the property in question. The lawsuit revealed that the Wells Fargo manager was instructed to lie about the documentation so the borrower had no idea the documentation was lost or never signed. In another case, an assignment of a deed of trust from one bank to another was never signed nor notarized. These types of fraudulent transfers are common and prey on unsophisticated borrowers who simply don’t notice.
Why Are Homeowners Duped by These Scams?
Most homeowners don’t know the terms of their loan and what would happen if the bank forecloses. They further are unaware of the time frame for foreclosure and their rights during foreclosure. There is also the social stigma homeowners face when they fall behind on their mortgage payments, making them less likely to seek legitimate foreclosure help. The shame of foreclosure coupled with lack of knowledge leads consumers to make hurried decisions that are not good judgments. Further, there aren’t enough protections for people facing foreclosure from these types of fraud.
How Can You Ensure You Are Not A Foreclosure Fraud Victim?
If you receive a notice of foreclosure from your lender or carrier of the deed of trust on your home, investigate whether the notice is legitimate. A licensed real estate attorney can help you make that determination.
Assuming documentation is proper, be cautious of any mortgage rescuer who claims that they can help you avoid foreclosure. Be even more suspicious if the rescuer makes you sign any documentation. You should not sign anything pertaining to your home without a licensed attorney present to represent your interests.
Finally, don’t be ashamed if you’ve fallen behind on your payments and receive a notice of foreclosure. People fall on hard times and foreclosures happen. It is imperative that you speak with someone knowledgeable and reputable about foreclosures to help guide you through the process. It is often those who remain silent that find themselves subject to a foreclosure scam.
Authored by Erin Chan-Adams, Legal Match Legal Writer and Attorney at Law