What is a Foreclosure Scam?
As more Americans face difficulty making their mortgage payments, foreclosure rescue “specialists” are promoting their ability to help save homes from foreclosure – usually for a fairly hefty fee. In reality, many either provide services at a high price that can be obtained for free from a qualified nonprofit counseling agency – or deliver little or nothing for the money received.
Types of fraud schemes
There are various forms of foreclosure fraud scams, but the most prevalent ruses fit into three categories:
- Phantom Help – Phony mortgage consultants charge high fees for work the homeowners could either easily do themselves, or get at no cost through a HUD-approved housing counselor.
- Bogus Bailout – Homeowners are tricked into believing they can stay in their homes and rent from the scammers with the option to eventually buy their homes back. The terms for this type of scam are typically very disadvantageous for the homeowner.
- Bait and Switch – Homeowners think they are signing new mortgage papers that will solve their foreclosure problems, when in fact they are deceived into signing over the deeds to their homes.
How to Get Help
- The U.S. Department of Housing and Urban Development (HUD) maintains a list of approved housing counselors. HUD can also help locate a counseling agency by phone (1-800-569-4287).
- The HOPE NOW Alliance, supported by HUD, the U.S. Department of Treasury, and various lenders and mortgage insurance companies, maintains partnerships with nonprofit organizations and other resources. HOPE NOW can be contacted at 1-800-995-HOPE or www.995hope.org. Be aware that many scammers have tried imitating the HOPE NOW Alliance.
If you think you have been a victim, contact your local District Attorney’s office, State or County Department of Consumer Affairs, or the Fraud Unit of your State Department of Real Estate.