How to Avoid Foreclosure Scams

Foreclosure scams come in many forms these days, and many homeowners are having a difficult time figuring out the difference between a scam and what is a legitimate resource that can help them out of a difficult situation. There are many free resources available for homeowners facing foreclosure, so be sure to check those out before paying someone who says they can stop the foreclosure process for you.

Difficulty: Easy

Instructions

Things You'll Need:

• Information regarding your home loans, including the loan numbers.
• Telephone.
• Internet access.
• Patience!

1. Learn how to spot a foreclosure scam.
   
   Suspect a scam when you see wording like this, either in a mailer or on a road sign:
   
   * "Stop Foreclosure Now!"
   * "We guarantee to stop your foreclosure."
   * Keep Your Home. We know your home is scheduled to be sold. No Problem!"
   * "We have special relationships within many banks that can speed up case approvals."
   * "We Can Save Your Home. Guaranteed. Free Consultation"
   * "We stop foreclosures everyday. Our team of professionals can stop yours this week!"

2. Be wary of "handwritten" signs and letters!
   
   The "handwritten" signs you see along the roadways are mass-produced and are commonly known as "bandit signs", meaning that they are illegal and disposable. The "handwritten" look is meant to lure the unwary consumer into thinking that they are from some local guy who really wants to help rather than a faceless corporation.
   
   The letters are also mass-produced and are sent to every homeowner who has had a Notice of Default (NOD) filed by their lender. These are broad-scale marketing, pure and simple, and most of these are advertising some sort of foreclosure scam.

3. Avoid paying up-front fees for foreclosure assistance.
   
   There are many free resources set up by the Federal Reserve and HUD for homeowners who are facing foreclosure. See the "additional resources" section of this article for links to free counselling and more.
   
   If you decide to pay for foreclosure assistance, it is best to pay for the service after it is complete, rather than paying an up-front fee.
   
   In some states, such as California, it is illegal for anyone who is not a lawyer to charge up-front fees to assist homeowners where a Notice of Default (NOD) has already been filed. Most of the foreclosure scams require up-front payments of $2,500 or more, so be wary whenever you are asked to pay any sort of up-front fee.
   
   If you are a California homeowner and have not received a Notice of Default (NOD) yet, then it is legal for a real estate licensee (Realtor or lender) to collect an up-front fee for foreclosure prevention services. However, they must have you sign an agreement that specifies what services will be performed, and this agreement must be approved by the California Department of Real Estate (DRE).

4. Be wary of offers that seem too good to be true.
   
   If someone offers to "buy" your home and then let you stay in it, suspect a scam. Many homeowners are signing over the deeds to their homes after receiving offers like this, only to find out that they just gave their home away and will receive absolutely nothing in return.

5. Know your options!
   
   If you are facing foreclosure, you have three primary options available to avoid serious damage to your credit: a loan modification, a short sale, or a deed in lieu of foreclosure. Be aware that a foreclosure on your credit report is serious enough to put security clearances and certain jobs at risk, so this should be avoided if possible.
   
   With a loan modification, your lender will adjust the terms of your mortgage so you can still afford to stay in your home. This can be a do-it-yourself option, although it does require patience and persistence! Call your bank and ask to speak to their Loan Modification or Loss Mitigation Department to start this process. You must be able to prove that you have sufficient income to cover the new mortgage payment in order to qualify for a loan modification.
   
   With a short sale, you'll be selling your home at market value, which will be less than the amount you owe to the bank. Your Realtor will list your home on the MLS, and will present offers that you receive from buyers to your bank along with other documentation that will assist the bank in making the decision to accept the buyer's offer and write off the rest of your loan balance.
   
   With a deed in lieu of foreclosure, you will voluntarily sign the deed for your home over to the bank. The bank will take ownership of your home, but avoid the costs and delays of the foreclosure process.

6. Seek professional advice.
   
   Be sure to contact your Realtor, accountant and attorney for advice if you are facing foreclosure. Each of these professionals will be able to assist you in different ways, and can work together to help you find the best solution for your situation. If you are approached by someone offering some level of foreclosure assistance, be sure to contact one of these professionals before signing up for any foreclosure prevention programs, since they should be able to help you to avoid getting trapped in a foreclosure scam.

Resources

• Federal Reserve Article on Foreclosure Rescue Scams
• Federal Foreclosure Resource Centers (free service)
• Putting Your Home on the Line is Risky Business
• HUD-Sponsored No-Cost Counselling Centers
• Federal Reserve Educates Consumers About Foreclosure Rescue Scams
• Short Sale Primer

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on 4/7/2009 Many home owners in a difficult situation; I hope read this.How To Avoid Foreclosure Scams. Great article 5*.