Foreclosure Rescue and Loan Modification Scams

As the number of foreclosures grows, so too does the number of scams and schemes involving mortgage rescue plans. These scams could result in the loss of your home.

You may see claims similar to:

• “Stop Foreclosure Now!”
• “We have special relationships with most banks that can speed up case approvals.”
• “We Can Save Your Home. Guaranteed!”
• “We stop foreclosures every day. We can stop yours this week.”
• “We buy houses.”

Marketing red flags:

• Claims to be affiliated with a government agency.
• Calls itself a “mortgage consultant,” “foreclosure service” or “loan modification service.”
• Offers a guarantee to stop the foreclosure process.
• Collects a fee before providing full services. In most cases, charging such fees violates Arkansas law.
• Accepts payment only by cashier’s check or wire transfer.
• Encourages you to transfer the title to them with a promise that you can buy it back over time or refinance it later.
• Tells you to make your mortgage payments directly to them, rather than to your lender.
• Suggests that you stop making mortgage payments in order to qualify for the program.
• Offers to buy your house for cash at a fixed price that is not set by the housing market at the time of sale.
• Uses high-pressure tactics, like pushing you to sign paperwork you have not had time to read thoroughly or that you do not understand.
• Instructs you not to contact your lender, credit counselor or attorney.

Where to find legitimate help:

• If you are having trouble paying your mortgage or you have gotten a foreclosure notice, contact your lender immediately. Most mortgage companies have a legal obligation to assist distressed borrowers and sponsor programs to assist homeowners in financial distress. You may be able to negotiate a new repayment schedule.
• For other foreclosure prevention options, the Federal Trade Commission has some helpful tips on their foreclosure prevention site.
• Organizations offer free or low-cost help to homeowners. You can contact the U.S. Department of Housing and Urban Development (HUD) or the housing authority in your State, city, or county for help in finding a legitimate housing counseling agency nearby. To contact HUD, call (800) 569-4287.
• The Making Home Affordable Program is an official program of the Department of the Treasury and the Department of Housing and Development set up to assist homeowners who are struggling with foreclosure. Visit MakingHomeAffordable.gov for more information.
• Additionally, the nonprofit Homeownership Preservation Foundation at (888) 995-HOPE or HopeNow.com may be able to provide assistance.
• If you have any questions about a company offering foreclosure rescue services you may contact the Arkansas Securities Department at (501) 324-9260 or (800) 981-4429.

Scams:

• Phony Counseling: In this type of scam, the con artist claims to be able to negotiate a deal with a lender, requiring an up-front fee for the service. You may be asked to pay a monthly fee. Once you pay the fee, the scam artist takes off with your money. Sometimes, the scammer takes your mortgage payments while presumably “negotiating” with your lender. Most often, the lender never sees the money and you fall further behind in your payments.
• Bait-and-Switch: Always read what you are signing. Scammers tell you the documents are a new loan to make your existing mortgage current, but in reality, the documents surrender the title of your house in return for a small loan worth less than the value of your home.
• Rent-to-Buy Schemes: The con artist offers to allow you to rent your own home with the option to repurchase in the next few years. The con artist may tell you that surrendering the title will permit a more credit-worthy borrower to secure new financing. Most of the time, the terms under which you could repurchase your home are impossible to meet. In another variation, you are told that if you sign over the deed and move out, the con artist will find a buyer for your home. You are promised a portion of the profit when the home sells. However, once you sign over the deed you no longer have control of the property; the con artist simply rents out your home, keeps the money and waits until your lender forecloses. Remember, you are still responsible for your mortgage even if you sign over your deed to someone else. If the house sells for less than what is owed on the mortgage, you are still liable for the remaining debt.