Don’t be fooled by the fancy slogans:
“Attention Homeowner: Save Your Home.”
“Stop Foreclosure Now!”
“Before You File Bankruptcy Call Me First.”
These solicitations seem to be everywhere and unfortunately, not all have
your best interests in mind.
People in foreclosure are vulnerable. The most common scams occur during or
immediately after the foreclosure. Why do homeowners fall for them? For one
thing, homeowners do not educate themselves about their rights and time frames
in the face of a potential foreclosure. As a result, they tend to make rushed
and uninformed decisions.
Contrary to what scammers would have you believe, when you receive your
foreclosure notice, you should contact your lender and legal counsel first.
There are many remedies available that can save your home or failing that, your
credit.
Take a very close look before you sign. While the proposed “solution” may
sound good, the ultimate goal may be to take your home and your equity. Make
certain that you are dealing with a reputable organization and understand
exactly what you are doing.
Potential Scams
Foreclosure rescue scams are often very creative and the individuals
operating them very crafty.
- “We’ll Save Your Credit! Just pay us a fee and sign your house over to us.
The foreclosure will be recorded against us, not you.”
No it won’t. The foreclosure will be reported against the borrower on the
note, which is still you, the original homeowner.
- “We’ll give you some money, just sign your house over to us, and we’ll
cure the default.”
This can work if you know how much equity you are selling and if this party
will really cure the default and make the payments and if you still want to be
responsible for the loan. That is a lot of ifs – be careful!
- “We’ll pay off your delinquent mortgage; you can stay in your home as a
renter, and you will have the option to buy it back.”
The reality is that you will likely need a new loan that is larger than the
old one. The payments may be higher and qualifying for the loan may be more
difficult. This is the best case; often the terms of the buy-back are so onerous
that the buy-back becomes impossible.
The ugly reality is that often the “new” owner simply gives you an amount of
money and pockets the rents received while delaying the foreclosure as long as
possible. In the end, you become evicted from the home you no longer own and any
equity you once had is gone.
- “We’re the experts. Pay us a fee and we will negotiate with your lender to
save your home. Or we will provide you with the secrets to saving your home”
Generally the fee is outrageous and all that is done is light-duty telephone
calls and/or paperwork, none of which result in saving the house and all of
which you could have easily done yourself. With this false sense of hope, you
are unlikely to seek qualified help.
Warning Signs
Some warning signs that you are being set up as a victim of a foreclosure
rescue scam include:
- You are approached by a stranger with an unsolicited “rescue” offer.
- You are receiving unsolicited calls, mail or flyers about foreclosure
rescue or saving your home.
- You are asked to participate in a complicated transaction that you do not
fully understand.
- You are asked to sign documents that have blanks or false statements. No
matter what you are told, this is never okay!
Help is Available
If you are facing foreclosure or the possibility thereof, you are encouraged
to seek foreclosure prevention counseling.
- One good option is the Homeownership Preservation Foundation (888-995-HOPE
[4673]; www.hpfonline.org). Here you
can receive free advice from counselors who work for non-profit agencies
certified by the Department of Housing and Urban Development. The Foundation
is a Minnesota-based entity dedicated to reducing foreclosure and preserving
homeownership.
- Another source is the Wisconsin Foreclosure Resource (www.wisconsinforeclosureresource.com).
WHEDA has teamed with NeighborWorks® America, the Homeownership Preservation
Foundation and numerous counseling agencies and lenders to offer assistance
and access to counseling.
Foreclosure properties are an undeniable part of the real estate landscape.
But help is available from the right sources. Beware of solutions that sound too
good to be true – they probably are.
Kevin King is General Counsel for the WRA.
Published: 3/11/2008
