An unfortunate trend has developed involving scams by individuals as well as entire organizations, to take advantage of distressed homeowners who are already struggling and desperate to save their homes, or at least avoid foreclosure. I personally believe the main reason why more than 7 out of 10 homeowners who find themselves in financially difficulty end up in foreclosure with no assistance to prevent this catastrophe is the fact that they don’t know who they can trust. These scammers are creating confusion and compounding the situation. The good news is there are those who wish to combat mortgage relief fraud, including the Federal Trade commission.
So how do you know when you are approached by a mortgage relief scam verses legitimate assistance?
A Few Red Flags
Upfront Fees – Not only is it illegal but a certain sign that the proposed relief is fraud. Do not pay for the promise of results… if you have to pay anything at all pay only for results once the job is done.
Guarantees – Be suspicious of anyone promising guarantees. Any Iegitimate company should know the process is too complicated and dependant on many factors to guarantee results every time.
Government Affiliation – Some companies present themselves as government agencies or other authoritative entities with official looking websites ad seals, etc. Always verify the affiliation with your lender or legitimate government agencies.
Deed Transfer – Be wary of anyone asking you to sign papers transferring deed or title to your home. This can put you in a worse situation of being still on the hook for the loan and without ownership rights to the property.
Phantom Foreclosure Counseling – This is the most common form of relief fraud. In most cases if you avoid the Red Flag of upfront fees you will avoid this type of scam. Always check with HUD or the FTC to verify if they are legitimate.
Sale/Lease-back or Repurchase – Typically this scam involves signing the deed to the property over to a “land trust” with a promise to rent back to the homeowner until they can repurchase the home. Unfortunately, the new owner can evict, raise rent, or sell the property with little or no recourse by the former homeowner.
Fraudulent Modification – This type of scam involves a so called rescue company taking a fee to negotiate with the lender but actually just diverts the mortgage payments to themselves while the homeowner who thinks they are making payments goes to foreclosure.
So Where Can You Find Help?
The Federal Trade Commission is taking this very seriously. They issued a ruling in an effort to cut down on fraud in this area. The Mortgage Assistance Relief Services (MARS) Ruling applies to any business that provides a mortgage assistance relief services. This applies to anyone representing a plan, service, or program to assist homeowners to prevent or postpone foreclosure, or help them obtain other kinds of relief such as loan modifications, forbearance agreement, short sales, or extensions of time to cure defaults. For more information on this subject get my free report titled CAUTION: Protect Yourself Against Mortgage Relief Scams . To view the MARS rules for individuals and companies involved in mortgage relief assistance click on The MARS Rules. To enlist help from the FTC you can visit their website http://ftc.gov/opa/2010/11/mars.shtm or to report fraud or file a complaint visit the FTC’s online Complaint Assistant or call 1-877-FTC-HELP (1-877-382-4357).
HUD (U.S. Department of Housing and Urban Development) also takes these fraudulent actions against Struggling Homeowners very seriously. For assistance in Colorado go to http://www.hud.gov/local/co/homeownership/foreclosure.cfm for counseling assistance or to verify the legitimacy of a would be mortgage relief person.