How to Avoid Foreclosure Rescue Scams

With foreclosures at an all-time high, many desperate property owners are being victimized by unscrupulous companies and individuals who promise a way out of debt. In reality, they are looking to benefit financially without concern for the property owners. In order for owners to avoid these rescue scams, they must be vigilant about the companies they deal with and the activities that can lead to disaster.

Difficulty: Moderate

Instructions

1. Talk to your lender before dealing with any outside party. Most lenders will attempt to work with borrowers to find a way to keep properties out of foreclosure. If you become involved with a company that tells you to discontinue contact with the lender, you should cease dealing with that company immediately.

2. Refrain from paying anyone who promises to process paperwork or make phone calls to your lender for you regarding the foreclosure. Most of the individuals who use these scams do little, if anything, to prevent your property from being put into foreclosure, and you can make calls or send letters yourself.

3. Avoid signing any documents or contracts given to you by anyone, unless you have discussed your situation with an attorney who has reviewed the documents in question. Rescue scammers have been known to use a bait-and-switch tactic whereby they have you sign a document you believe to be for one purpose, when in fact it is a document that transfers ownership of your property to them.

4. Use caution when dealing with parties who promise to pay off your delinquency in exchange for you transferring over the property to them. Most promise that you can lease your house from them, and then buy it back at a later date. Although this type of deal is not illegal, the transferee is not obligated by law to sell the property back to the original owner. In addition, most homeowners find that they are unable to make the lease payments and end up out of the property altogether.

5. Beware of so-called counseling agencies that are not certified by the Department of Housing and Urban Development (HUD), which maintains a list of reputable companies (see Resources below). Since these agencies are not subject to the stringent standards set by HUD, you may become a victim of fraudulent fees and services. True counseling agencies will not charge a fee for services.

Tips & Warnings

• You should avoid rescue scams where you are told to pay your mortgage to a third party who will then negotiate with your lender on your behalf. In most cases, you will not only lose your house, but also all of the money you paid to the third party.

Resources

• Housing counseling at HUD