Foreclosure and mortgage rescue scams

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Examples of scams related to mortgage modification and foreclosure prevention include:

  • Debt-elimination schemes. Scam artists may use illegitimate legal arguments to persuade you that they can "eliminate" your debt and that you are not obligated to pay back your mortgage. They may make inaccurate claims about applicable laws and finance, such as "secret laws" that allow you to erase your debts or that imply that banks do not have the authority to lend money and therefore you do not have to pay them back.
  • Leaseback and rent-to-buy schemes. Con artists may try to entice you to transfer the title of your home to them with promises of new and better financing. They say you can rent your home and eventually buy it back. But, if you do not comply with the terms of the rent-to-buy agreement, you can lose your money and your home. The agreement may be written in a way that makes it very hard for you to comply. In fact, the con artists have no intention of ever selling your home back to you. They want your home and your money.
  • Fake “government” modification programs. Scam artists create websites that mimic federal websites and use business names similar to those used by government agencies. They may use terms like “federal,” “TARP,” “CARES Act,” “stimulus,” or other words, acronyms, and abbreviations commonly associated with official government programs. These tactics are designed to fool you into thinking they are approved by, or affiliated with, the federal government.
  • Bankruptcy scams. Scam artists may claim bankruptcy will solve your problems. But, filing for bankruptcy is rarely a permanent solution to prevent foreclosure. Filing for bankruptcy brings an "automatic stay" into effect that stops any collection and foreclosure action while the bankruptcy court administers the case. But, eventually you must make payments on your mortgage or the lender has the right to foreclose. In addition, bankruptcy lowers your credit score and remains on your credit report for 10 years.
  • Foreclosure rescue and refinance fraud. Scam artists offer to act as intermediaries between homeowners and lenders and to negotiate repayment plans or loan modifications. The scammer may even "guarantee" to save your home from foreclosure. They tell you to make mortgage payments directly to them so they can forward payments to your lender. In reality, the scammer may pocket your money and leave you in worse shape on your loan.

How can I protect myself from mortgage modification scams and foreclosure rescue scams?

You should proceed with caution when dealing with anyone offering to help you modify your mortgage or to rescue you from foreclosure. You can seek assistance from a counselor approved by the Housing and Urban Development (HUD) agency at no cost to you. You can also work with your lender directly.

The following tips can help you avoid scams involving mortgage modification and foreclosure rescue scams:
  • Know what you are signing.
  • Read and understand every document that you sign. Never rely solely on an oral explanation of a document.
  • Be wary of signing a document that contains errors or false statements, even if someone promises to correct them.
  • If you do not understand a document, seek legal assistance or a financial counselor you trust.
  • Contact your lender or mortgage servicer. Talk with an agent in the loss-mitigation department about mortgage modification options and other alternatives to foreclosure.
  • Ask a legitimate housing or financial counselor for help. HUD-approved housing counselors are available at an interactive voice system at (800) 569-4287 or on the HUD website. There is no fee for this assistance.
  • Make all mortgage payments directly to your lender or mortgage servicer. Be wary of anyone offering to make mortgage payments for you. Do not stop making your payments.
  • Make sure that you understand every aspect of a document. Otherwise, the document may obligate you to terms you do not want, and it may convey ownership of your home to someone else.
  • Be wary of signing documents with blank spaces that can be filled in later.
  • Do not sign over your deed without consulting a trusted expert. Foreclosure scams often involve the transfer of homeownership to a third party. Before agreeing to a title transfer, you should consider advice from your legal assistance, financial adviser, credit counselor, or another independent person you can trust. When you sign over your deed, you lose your rights to your home and any equity you have, but you remain obligated to satisfy the terms of the mortgage.
  • Get promises in writing. Be wary of accepting oral promises and agreements involving your home, because they usually are not legally binding. Protect your rights with a written document or a contract signed by the person making the promise. Keep copies of all contracts that you sign. Never sign anything that you don't understand and agree to.

Any of the following could be a sign of a scam (but there may be others):

  • "File for bankruptcy and you can keep your home." Filing for bankruptcy stops foreclosure only temporarily. If you do not make your mortgage payments, the bankruptcy court may eventually allow your lender to foreclose.
  • "Why haven't you replied to our offer? Do you want to live on the streets?" High-pressure tactics signal trouble. A mortgage assistance relief service provider is legally obligated to say “You may stop doing business with us at any time. You may accept or reject the offer of mortgage assistance we obtain from your lender (or servicer). If you reject the offer, you do not have to pay us.” If someone pressures you to work with him or her to stop foreclosure, that person may be violating the law. Legitimate housing counselors do not conduct business that way.
  • "Pay us $1,000 and we'll save your home." Some legitimate housing counselors may charge small fees, but fees that amount to thousands of dollars are likely a sign of potential fraud. Mortgage assistance relief service providers cannot collect fees until you have a written, acceptable offer from your lender or servicer and a written description of the key changes to your mortgage.
  • "I guarantee I will save your home—trust me." Beware of guarantees that a person or mortgage assistance relief service providers can stop foreclosure and allow you to remain in your house. Unrealistic promises are a sign that the person making them likely will not consider your particular circumstances and is unlikely to provide services that will actually help you. Look for providers that give you realistic evidence for any claims they make.
  • "Sign over your home and we'll let you stay in it." Beware of anyone offering to make mortgage payments for you and rent your home back to you in exchange for the title to your home. Signing over the deed to a person gives that person the power to evict you, to raise your rent, or to sell your house. Although you will no longer own your home, you still will be legally responsible for paying the mortgage.
  • "Stop paying your mortgage." Do not trust anyone who tells you to stop making payments to your lender or servicer, even if the person promises to make payments for you. If a mortgage assistance relief service provider tells you this, it must also tell you that you may lose your home and damage your credit rating.
  • "If your lender calls, don't talk to him or her." Mortgage assistance relief service providers are legally barred from telling you to stop communicating with your lender or servicer. Advice like this is a good sign of a scam.
  • "Your lender never had the legal authority to make a loan." Beware of anyone who claims that "secret laws" can erase your debt and have your mortgage contract declared invalid. A mortgage assistance relief service provider may not misrepresent the terms of your loan or the obligations to make payments under the loan. It is illegal for someone to claim that you are not obligated to pay your mortgage.
  • "Just sign this now; we'll fill in the blanks later." Take the time to read and understand anything you sign. Never let anyone else fill out paperwork for you. Don't let anyone pressure you into signing anything that you don't agree with or understand. Never sign documents with blank spaces that can be filled in later.
  • "Call 1-800-Fed-Loan." Beware of providers that imitate official federal programs. Providers of mortgage assistance relief services must tell you in their communications with you that they are not affiliated with the government. Keep in mind that assistance from a Department of Housing and Urban Development (HUD)-approved housing counselor is free and available by calling (800) 569-4287 or searching online for a housing counseling agency. You can always work directly with your lender or mortgage servicer.











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