Foreclosure scams and fraud are a serious problem that can devastate homeowners who are already struggling with financial difficulties. These scams often involve promises of assistance in stopping or delaying a foreclosure, but instead result in homeowners losing their homes and their money. In this article, we will discuss some common foreclosure scams and how to avoid them.
- The Equity Skimming Scam
This scam targets homeowners who are facing foreclosure and have a significant amount of equity in their homes. Scammers promise to help the homeowner by taking over the mortgage payments, allowing them to stay in the home as renters, and eventually purchasing the home back from the homeowner at a later date. However, the scammers usually don’t make the mortgage payments and instead pocket the rent money. Eventually, the homeowner will be evicted and lose their equity in the home.
- The Phantom Help Scam
Phantom help scams involve companies that offer to help homeowners negotiate with their lenders to avoid foreclosure. The scammers often charge upfront fees and promise to work with the lender to modify the homeowner’s loan or get a forbearance agreement. In reality, the scammers do very little to help the homeowner and may even cause delays that make the situation worse. Homeowners should never pay upfront fees for foreclosure assistance.
- The Bailout Scam
Bailout scams target homeowners who are struggling to make their mortgage payments but are not yet in foreclosure. Scammers promise to help the homeowner by refinancing the mortgage or obtaining a loan modification that will reduce the monthly payment. However, the scammers often charge high fees and may require the homeowner to sign over the deed to their home as collateral. Once the homeowner signs over the deed, the scammer will often disappear with the money, leaving the homeowner in worse financial shape than before.
How to Avoid Foreclosure Scams
The best way to avoid foreclosure scams is to be proactive and seek legitimate help before it’s too late. Here are some steps homeowners can take to protect themselves:
- Work with a HUD-approved housing counselor. HUD-approved counselors can provide free assistance to homeowners facing foreclosure. They can help homeowners understand their options, negotiate with lenders, and create a budget to manage their finances. Homeowners can find a HUD-approved counselor by visiting HUD’s website.
- Never pay upfront fees. Legitimate foreclosure assistance providers will not charge upfront fees for their services. Homeowners should be wary of anyone who asks for payment before providing any help.
- Don’t sign over the deed to your home. Homeowners should never sign over the deed to their home as collateral for a loan or other assistance. This is a sure sign of a scam.
- Do your research. Before working with any foreclosure assistance provider, homeowners should research the company’s reputation and check for complaints with the Better Business Bureau or other consumer protection agencies.
Foreclosure scams and fraud can be devastating for homeowners who are already struggling with financial difficulties. It’s important to be vigilant and take steps to protect yourself from these scams. By working with a HUD-approved housing counselor, avoiding upfront fees, not signing over the deed to your home, and doing your research, you can increase your chances of avoiding foreclosure scams and finding legitimate assistance.