| A growing scam that disproportionately targets homeowners in financial distress can, and often does, literally cost them the homes they have lived in for years and worked hard to obtain. It is called a foreclosure "rescue" scam, and in no sense is it a genuine rescue; in fact it is usually quite the opposite.
Foreclosure "rescue" scams target those who have fallen behind on their mortgage payments. In this scam, a con artist who promises to help consumers save their home is actually intent on stealing the home-often a family's most precious asset-or most of its accumulated equity.
Some homeowners will be facing foreclosure because of a foreclosure rescue scam. The "rescuer" may be the foreclosing creditor, although this scenario is uncommon. Usually, the rescuer acquires title to the property, not just a mortgage on the property, and then proceeds by way of eviction rather than foreclosure to remove the (former) homeowner. Other times, the rescuer acquires title to the home but does not payoff the original mortgage. Then the original lender may be foreclosing. It is important to recognize the red flags of a foreclosure rescue scam so that these cases can be given special treatment.
"Rescuers" are also likely to be soliciting the homeowner while you are trying to put together a workout. It is important to alert homeowners about these scams so that they know to avoid them.
What Are Foreclosure Rescue Scams?
Foreclosure rescue scams most often appear in one of three varieties:
· The "bailout" that never quite works. This scenario includes various schemes under which the homeowner surrenders title to the house in the belief that she is entering a deal where she will be able to remain as a renter, and then repurchase the house over the next few years. This is also known as a "lease/buyback scheme." Homeowners are sometimes told that surrendering title is necessary so that someone with a better credit rating can secure new financing to prevent the loss of the home. But the terms of these deals are invariably so onerous that the buyback becomes impossible, the homeowner permanently loses possession, and the "rescuer" walks off with all or most of the home's equity.
· The second variety is a bait and switch where the homeowner does not realize he or she is surrendering ownership of the house in exchange for a "rescue." Many homeowners later insist that they believed they were signing documents for a new loan to make the mortgage current. Many also say they had made it quite clear they had no intention of selling or giving up their home to anyone. It is important to note that substantial numbers of this third type of scenario involve fraud and forgeries of deeds. In many cases, the home is transferred for a small fraction of its actual value.
Typical Tactics Employed by “Rescuers”
· The "rescuer" starts by identifying distressed homeowners through public foreclosure notices in newspapers or at government offices. These records are more readily accessible than in the past because they are computerized and private firms now compile and sell the lists. The homeowner has not been foreclosed on yet, but is merely threatened with foreclosure after falling behind on mortgage payments.
· The "rescuer" then contacts the homeowner by phone, personal visit, card or flyer left at the door, or advertises. The initial contact typically revolves around a simple message such as "Stop foreclosure with just one phone call, “I’d like to buy your house," "You have options," or "Do you need instant debt relief and CASH?" This contact also frequently contains a "time is of the essence" theme, adding a note of urgency to what is already a stressful situation.
· Initial meetings stress the promise of a "fresh start" likely what a frightened homeowner most wants to hear and often feature written or recorded "testimonials" from other homeowners the "rescue" scammer supposedly saved. What is glossed over is that the rescuer's help often comes at a very steep price and is usually either ineffective or affirmatively harmful. Homeowners are also frequently instructed to cease all contact with lawyers or the mortgage lender and let the "rescuer" handle all negotiations. This devious tactic simultaneously cuts off access to possible refinancing options while running out the clock on ways to prevent the foreclosure.
· Once it is too late to save the home, the property is either taken by the "rescuer" or, having been drained of substantial equity through the "rescuer's" imposition of heavy fees and other charges, simply lost to foreclosure. After things fall apart, many homeowners suffer the added stress and indignity of being evicted by their "rescuer" from the home they once owned. |
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