How to Spot Scams
Common Loan Modification Scams
Loan modifications are changing every day. Here are some of
the most common loan
modification scams out there today.
- Phony Counseling or Foreclosure Rescue Scams
The scam artist poses as a counselor and tells you he can
negotiate a deal with
your lender to save your house—if you pay him a fee first. He
may even tell
you not to contact your lender, lawyer or housing
counselor—that he'll handle
all details. He may even insist that you make all mortgage
payments directly to
him while he negotiates with the lender. Once you pay the fee,
or a few mortgage
payments, the scammer disappears with your money.
- Fake "Government" Modification Programs
Some scammers may claim to be affiliated with, or approved by,
the government, or
they may ask you to pay high, up-front fees to qualify for
government mortgage modification
programs. The scammer's company name and Web site may sound
like a real government
agency. You may also see terms like "federal," "TARP" or other
words related to
official U.S. government programs.
Your lender will be able to tell you if you qualify for any
government programs
to prevent foreclosure. And you do not have to pay to benefit
from these programs.
- Bait-and-Switch
The scam artist convinces you to sign documents for a "new
loan modification" that
will make your existing mortgage current. This is a trick. You
actually just signed
documents that surrender the title of your house to the scam
artist in exchange
for a "rescue" loan.
- Rent-to-Own or Leaseback Scheme
A scammer urges you to surrender the title of your home as
part of a deal that will
let you stay in your home as a renter and then buy it back in a
few years. He may
tell you that surrendering the title will permit a borrower
with a better credit
rating to get new financing—and keep you from losing your
home. However, the scammer
may have no intention of ever selling the home back to you.
But the terms of these deals usually make buying back your
home impossible. Worse
yet, when the new borrower defaults on the loan, you're
evicted.
Variations:
1. The scammer raises your rent over time to the point that
you can’t afford it. After
missing several rent payments, you are evicted, leaving the
"rescuer" free to sell
your house.
2. The scammer offers to find a buyer for your home, but only
if you sign over the
deed and move out. The scammer promises to pay you some of
the profit when the home
sells. But the scammer simply rents out your home and keeps
the profits while your
lender proceeds with the foreclosure. You lose your home and
are still responsible
for the unpaid mortgage, because transferring the deed does
not affect your mortgage
obligation.
- Bankruptcy to Avoid Foreclosure
The scammer may promise to negotiate with your lender or get
refinancing on your
behalf if you pay a fee up front. Instead of contacting your
lender or refinancing
your loan, he pockets the fee and files a bankruptcy case in
your name—sometimes
without your knowledge.
A bankruptcy filing often stops a home foreclosure, but only
temporarily. Filing
bankruptcy stops any collection and foreclosure while the
bankruptcy court administers
the case. But, eventually you must start paying your mortgage,
or the lender will
be able to foreclose.
You could lose the money you paid to the scammer and your
home. Worse yet, a bankruptcy
stays on your credit report for 10 years, which makes it
difficult to obtain credit,
buy a home, get life insurance or even get a job.