Foreclosure Scammers use Down Real Estate Market to Profit from Hardships

By
Mortgage and Lending with Guild Mortgage Co - Oak Harbor WA

When there are people in trouble, there is almost always someone around to take advantage of them. Now, with an increase of foreclosures, we have a number of foreclosure scams starting or continuing to operate.

Homeowners facing foreclosure should beware of foreclosure scams. Scammers can cause the homeowner to lose both the home and the equity they have built.

 Many scammers contact homeowners offering to "save" their houses. Property information is a matter of public record and fairly accessible by anyone interested in obtaining it. In addition to the informa­tion recorded with the county when the home was purchased, notifications of default filed by the lender or a lien holder or if the house is subject to an auction or to be foreclosed are all public record. Unfortunately, unscrupulous individuals can use this informa­tion to take advantage of homeowners in distress.

Other times, homeowners facing foreclosure may respond to ads offering to pay cash imme­diately for houses. Although this sounds like a quick solution, it may not be the right option if the ultimate goal is to keep your home. Care is advised, because many of these offers may also be scams.

Scammers are particularly interested in proper­ties where homeowners have been living for a long time or there is an indication the homeowner has built a significant amount of equity. The schemes vary depending on what the scammer is trying to obtain. For example:

Scammers advertise their services to nego­tiate with the lender on behalf of the homeowner to save the house. They often collect fees up-front, usually one month's mortgage payment. The scammers prohibit the homeowner to contact the lender so the process will not be "disrupted." In many cases, the scammers do very little or nothing to help consumers.

In other cases, scammers will convince the homeowner to convey or give up the title of the house with the promise to return the house after it has been taken out of the fore­closure process. Scammers commonly pay the homeowner an amount significantly less than the real value of the home, sometimes as little as $1. In some cases, the deal includes a rental agreement where the homeowner pays rent, which can be more than the original mortgage payment. The homeowner is still respon­sible for the payment of taxes, insurance, and other obligations as if nothing has changed except for the ownership of the house. Since the homeowner no longer has the title, the scammer can evict the homeowner if he or she does not pay the rent.

Some scammers say they will help home­owners save their house by refinancing the loan in default. They ask the homeowner to sign papers that appear to be refinancing or lease-to-buy agreements. But in most cases, the documents give the scammer the title of the house.

There are legitimate companies that are set up to negotiate for the homeowner in foreclosure difficulty. There are nonprofit and for profit companies that will help the homeowner negotiate for themselves in this process also.

The Mortgage Rescue Fraud Protection Act, passed by the Oregon Legislature in 2008, provides protection for homeowners facing foreclosure who are targeted by these scams. The law addresses "foreclosure consultants," who offer to help a homeowner negotiating with the lender or financial institution to save a home, and "equity purchasers," who acquire the title of a home in foreclosure.

The law requires that foreclosure consultants or equity purchasers provide the homeowner with a contract with clear disclosures at least 24 hours before they are personally signed and dated. The law also gives homeowners the opportunity to cancel the contracts.

If you, as a homeowner, decide to use such services to help you save your house or any type of assistance when your house is at risk, you should take the time to read the entire contract before you sign it! While the law has some protections and restrictions to prevent fraud, signing a contract means you agree with the terms and condi­tions included in it. It is strongly recommended you seek legal assistance to make sure you are protected by the provisions of this new law.

Contact the Oregon Attorney General Office if you or someone you know is a victim of a foreclosure scam. State Attorney General Office:  877-877-9392, www.doj.state.or.us,  E-mail: consumer.hotline@doj.state.or.us

 Article Written By:  Fred Chamberlin, A Eugene/Springfield Mortgage Consultant - 541-342-7576

Comments (12)

Jason Sardi
Auto & Home & Life Insurance throughout North Carolina - Charlotte, NC
Your Agent for Life

Fred - It is sickening, isn't it?  I see this kind of stuff plastered in advertisements all over the Internet... among other places.  Good info to get out there to consumers.  The more we look out for each other, the faster we will heal as an economy.

Oct 22, 2008 07:56 AM
Fred Chamberlin
Guild Mortgage Co - Oak Harbor WA - Oak Harbor, WA
Oak Harbor/Whidbeynulls, #1 Experienced FHA Mortgage Consultant

Yes Jason. I am constantly surprised at the number of people that will take advantage of a bad situation just to make a buck. There are legitimate people that are helping people but then we have the ones in the shadows.

Oct 22, 2008 08:00 AM
Bobby Stevens
Windermere Real Estate/Lane County - Eugene, OR
Realtor, Eugene, Oregon
Thanks for getting the word out on these house pirates Fred. It's particularly sad to think that some of the homeowners who fell for things like interest only ARM's may be desparate enough to get "victimized" yet again!
Oct 22, 2008 12:30 PM
Fred Chamberlin
Guild Mortgage Co - Oak Harbor WA - Oak Harbor, WA
Oak Harbor/Whidbeynulls, #1 Experienced FHA Mortgage Consultant

Absolutely right Bobby. I hope people read and pay attention.

Oct 22, 2008 12:59 PM
Stephen Kappre
KW Hometown - Mantua, NJ
Helping You Home

Fred that's one of the coolest looking fish!

Oct 22, 2008 01:12 PM
Fred Chamberlin
Guild Mortgage Co - Oak Harbor WA - Oak Harbor, WA
Oak Harbor/Whidbeynulls, #1 Experienced FHA Mortgage Consultant

Thanks Steve, I figure a shark for the sharks.

Oct 22, 2008 02:11 PM
Sandy Shores FL RealtorĀ®, Melbourne Real Estate
M & M Realty of Brevard Inc. - Melbourne, FL
Brevard County Real Estate, Florida's Space Coast

Fred, We have heard of many of these types of scams around the country.  There's always someone out there looking for fresh blood, isn' t there.  Thanks again for another great post!

Oct 23, 2008 01:08 AM
Fred Chamberlin
Guild Mortgage Co - Oak Harbor WA - Oak Harbor, WA
Oak Harbor/Whidbeynulls, #1 Experienced FHA Mortgage Consultant

Thanks Sandy, those in difficulty are often the ones that continue to be taken advantage of.

Oct 23, 2008 01:19 AM
Danny Thornton
R & D Art - Knoxville, TN
WordPress Guru

Fred, it is bad that these individuals would take advantage of a person in distress. With that said, it has been and will continue to be a part of the world. People need to get educated in how to spot it.

Oct 23, 2008 02:07 AM
Fred Chamberlin
Guild Mortgage Co - Oak Harbor WA - Oak Harbor, WA
Oak Harbor/Whidbeynulls, #1 Experienced FHA Mortgage Consultant

Well put Danny. Knowledge is key.

Oct 23, 2008 02:35 AM
Ryan Shaughnessy
PREA Signature Realty - www.preasignaturerealty.com - Saint Louis, MO
Broker/Attorney - Your Lafayette Square Real Estate Partner

In good and bad markets, there are always charlatans out there committing fraud.  If someone can magically save your home (without paying off your loan), then it is probably too good to be true.  I still think the best advice is to obtain a referral to a loan counseling program, bankruptcy attorney, and an experienced real estate professional handling short sales and then figure the options from there.

Oct 24, 2008 01:25 AM
Fred Chamberlin
Guild Mortgage Co - Oak Harbor WA - Oak Harbor, WA
Oak Harbor/Whidbeynulls, #1 Experienced FHA Mortgage Consultant

Good advice Ryan. I think they should also first check with the programs set up to help them, like our local non profit, NEDCO.

Oct 24, 2008 02:52 AM