5 Nasty Foreclosure Rescue Scams to Avoid

According to RealtyTrac, a whopping one in 54 homes received a foreclosure notice last year. That’s 3.1 million foreclosure filings.

Scared yet? An ever-increasing pool of foreclosure rescue scammers are drooling at the prospect of capitalizing off your panic. And so far, they’re doing pretty well. From forgery to title transfer, these scamsters–some of them former real estate professionals–are making an art form of the foreclosure scam.

So far, a few pervasive scams have popped up enough times in the media to be dubbed endemic. Here they are, in no particular order. Do yourself a favor and avoid these five nasty foreclosure rescue scams:

1. The Pay Me First Scam

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Some foreclosure rescue scammers ask customers to pay them fees in exchange for delaying a foreclosure. It’s actually illegal for foreclosure rescue companies to collect fees before performing a service. They should be paid after negotiating new loans or monthly payments.

Unfortunately, some homeowners find out the hard way that paying companies before they perform a service leaves them without money or a home. The Star-Telegram reports on one San Francisco-area mortgage broker advertised foreclosure avoidance workshops on Craigslist. For a $2,500 upfront fee plus a $2,000 monthly payment, Freedom Financial Solutions claimed it would halt foreclosures by finding legal violations in homeowners’ mortgage agreements.

Instead, Cheryl Ann Montero, owner of the company, took an ownership stake in her clients’ houses, then filed for bankruptcy, which suspended foreclosures. Montero, who ended up delivering nothing to her clients, made off with $52,000 before declaring bankruptcy herself.

2. The Title Transfer Scam

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This scam involves transferring the title of your home to the foreclosure rescue company. This is a very, very bad idea. If your name is not on the title, guess who owns your home? Hint: It’s not you.

Rip-off Report reader Cheri had a scam like this happen to her. Facing foreclosure, she contacted a mortgage rescue company. The scammers executed a buyback scheme that would allow her to re-purchase her house at a different appraisal value. In order to finish the deal, they said they needed to put someone else’s name on the title of the home. Cheri would be a trustee, “guaranteeing” her that she would maintain control of the property while staying inside a renter.

It turned out Cheri’s name never made it to the title. She was paying down a mortgage on a home she no longer owned. The scammers made off with the title, possibly some equity, and the willingness to evict her from the house.

3. Sending Mortgage Payments to a Fake Address

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Some scammers ask to receive your payment in place of the lender. They claim they have a special relationship with the lender, or can renegotiate your mortgage if you send them payments. This is sketchy, to say the least. One California scammer, for example, made $1.2 million by pretending to be a lender—then fled to his native Mexico.

If someone tells you to ignore your lender letters, or to send the payments somewhere else, run the other direction.

4. Fake Lender Letters

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Some fraudsters have taken to forging major lenders’ letterhead and convincing homeowners to sign up for “official” loan modification services. Mail, envelopes, and letterhead may look exactly like the lender’s, but the content will be fraudulent.

The Lake County News reports that one Los Angeles ring even filed a fictitious business permit. The swindlers forged lender and government envelopes with “Final Notice” written on the outside. The letters inside told homeowners that if they sent in their mortgage information, they could apply for a home rescue program.

Once homeowners applied, they received a confirmation note and a set of forged lender documents. In the meantime, they were instructed to send their mortgage payments to a “Payment Processing Dept” located at a scammer’s PO box, where the money was stolen.

5. The Obama Rescue Plan Scam

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The Philadelphia Inquirer reports that some rescue companies are charging as much as $3,000 to modify customer loans under the new Obama relief plan. The truth is that you can find out about rescue plan yourself, either online at MakingHomeAffordable.gov, through the Homeownership Preservation Foundation at 995hope.org, or by calling 1-888-995-HOPE.

  • Fake lender letters, that’s pretty sneaky – most people aren’t going to verify the signature.

  • I totally agree that distressed homeowners need to be made aware of rescue scams. However, in these types of articles and speechs by President Obama and Geithner the full story is not getting out.

    I represent a Do-It-Yourself Loan Modification Software that has a support company available for answering questions. Since the product is a software being sold for $997 and the homeowner performs the service themselves a fee is required upfront. I am not providing a service; I’m providing software. Unfortunately, President Obama and Geithner are not aware of products such as mine so they give no mention of safe alternate solutions.

    Does all of this fearmongering coming from President Obama and Geithner really help the economy? Yes, there are scam artists out there and they should be prosecuted severely for preying on homeowners in distress. However, President Obama has stated himself that the goal of his program is to help 9 million distressed homeowners. The latest statistics are now showing that there could be as many as 24 million foreclosures before the end of all of this. Where are those 15 million homeowners going to get help?

    As a Christian and a moral person I always advise my customers of the free government programs available. I couldn’t sleep at night knowing that I did not inform my customers of all their options. That is one reason why I am a Real Estate Investor – to provide creative solutions to distressed homeowners. I’ve had many homeowners who have opted for a Short Sale instead of a Loan Modification. Sure, I may lose sales to the free government programs but my only wish is for the homeowners to get the best solution possible and save their home and/or their credit.

    Therefore, in conclusion I just wish that we would hear “the rest of the story” – as the late great and fellow Tulsan Paul Harvey would say.

  • Those stats are staggering. Good information here. While these things seem so basic, it is amazing what folks will do when emotionally spent.

    Kent

  • Mum

    @Jerry Powers: $997 for software and “answering questions”? C’mon.

  • Actually Kent,

    I’m on Jerry’s side here.

    One of the main reason distressed homeowners lose their homes is because they do not understand the loan modification application process, they will most likely fail to recieve a loan modification from their lender.

    While some lenders’ loss mitigation reps really do WANT to help homeowners, they are under pressure and obligated by their job discriptions to mitigate the situation so the “company” gets the best outcome; not the homeowner or even the investor who owns the mortgage note.

    ADVANCE FEES? Most sub-prime borrowers need a third party advocate. In spite of what the liberal media and the government are telling us, there aren’t enough trained loss mitigators to cope with the onslaught of homeowners seeking assistance, ergo, you have unscrupulous attorneys fronting loan modification scams that do indeed take an average of $3,000 from hapless homeowners leaving them high and dry for companies like mine clean up the mess. And we do clean up the mess.

    Unfortunately, we do have to collect a fee deposit in advance of loss mitigation case completion or we would never get paid. An awful lot of work goes into every home retention solution. Just collecting the required documentation from homeowners is a chore as most are just too palin apethic to give a damned beyond lip service to their plight. You have to remember; some, not all, sub-prime borrowers have a track record of not paying their bills. Why should they pay me once I fix their problem.

    I am in favor of everything and anything that can help homeowners complete a proper application in order to obtain a loan modification, repayment plan or pre-foreclosure/short sale.

    $1,000 for a software program or service that actually works is a bargain when you consider the alternative.

  • Be careful. If you make as much as a nickel helping someone in foreclosure, you’re considered a scam artist.

    In Washington state, the AG’s office only see investors as people “trying to make money off of someone’s foreclosure.” They have no concept of investors providing a good and valuable service that actually helps the homeowner.

    As such, it’s either a free service to the homeowner, or you took advantage of them and they’re now victims. Completely and totally absurd, but that’s how they see it.

    Joe Kaiser

    http://www.ibtimes.com/prnews/20090427/attorney-general-rob-mckenna-bogus-foreclosure-rescue-scam.htm

  • Mum – what you failed to notice is that the Support Team that is included in the Loan Mod system is a Law Firm based in Washington state. How much do attorney’s around you charge for unlimited consultation?

    I’ve heard of horror stories where homeowners try a Loan Mod without any type of help and they end up irritated and frustrated.

    The government’s program typically gets 1 – 2 percentage points shaved off homeowners mortgage. Our system has experienced 5 – 7 percentage points because the homeowners are educated and counseled with their workout package and negotiation with the bank.

    On a different note – about a week ago I received a letter from a Loan Mod company that attempted to make their letter look like an official government document! I could not believe that someone would stoop to defrauding the public in that manner. You had to really look at the letter closely to tell that it was not from the government. Then to make matters worse I received a call today from a Direct Mail marketing company wanting me to consider their service. I had them email me some information. They included an image of the letters that they send out for Loan Mods. I couldn’t believe what I saw! It was almost the same letterhead!!! The address on the top of the letter was Washington, DC. I don’t live in Washington DC! There is NO WAY I would even come close to considering using this tactic!! If you can’t be truthful and upfront about your company and product then you need to take your slimy self somewhere else! These people need to stop taking advantage of distressed homeowners! I always advise my customers on the existence of the free government program and HUD approved counselors. If they still prefer to purchase my system then I interview them to determine whether they are really a good candidate for a Loan Mod. If another solution is better for them then I will tell them. There have been cases where I didn’t make a penny but I still helped the homeowners either sell the property or structure a Lease Purchase for a tenant/buyer and the homeowner makes a little bit of money each month.

    All of the Real Estate Investors that I know truly care about helping homeowners in distress. We need more investors like that so that the public and government agencies stop looking at us like we’re preying on the weak!

  • Melvin

    Thanks for the information also check out http://www.realestatecorpuschristihomes.com

  • Thomas

    Re: HomeRescuePrograms.com

    DO NOT USE THESE GUYS!

    THEY ARE ALL HYPE, FOLLOWED BY NO RESULTS!

    BASED OUT OF SUNNY MARINA DEL RAY, CALIFORNIA. HERE YOU HAVE A COMPANY THAT EMPLOYS SOME OF THE MOST UN-PROFESSIONAL AND UN-TRAINED STAFF (SOME OF THEM EVEN USE PROFANITY WHEN YOU TALK TO THEM OVER THE PHONE) I HAVE EVER DONE BUSINESS WITH, TO NEGOTIATE THE FATE OF THE ROOF OVER YOURS AND YOUR FAMILIES HEAD.

    THEY ARE NOT A LEGITIMATE REAL ESTATE LAW FIRM AND BASICLY CHARGE YOU A $2500 UPFRONT FEE FOR SOMETHING YOU CAN DO ON YOUR OWN AND MUCH QUICKER THRU YOUR LENDER BY DEALING WITH THEM DIRECTLY.

    IF YOU HAVE THE LUXURY OF PAYING SOMEONE $2500 TO MAKE A COUPLE OF PHONE CALLS FOR YOU, ONLY TO BE PUT ON HOLD FOR 10MINS AND FAX YOUR INCOME DOCS INTO YOUR LENDER, THEN I THINK YOU DONT REALLY QUALIFY FOR A LOAN MODIFICATION TO BEGIN WITH.

    CHECK THIS LINK:

    http://losangeles.injuryboard.com/miscellaneous/fbi-beware-of-foreclosure-modification-scams.aspx?googleid=250258

  • It always amazes me just how low people (crooks) will go. Apparently these people have no conscience whatsoever!