Foreclosure and the Scams that Accompany It

English: Foreclosure Sign, Mortgage Crisis

English: Foreclosure Sign, Mortgage Crisis (Photo credit: Wikipedia)

If it is not enough that the foreclosure crisis has wreaked havoc on our national economy, scam artists are coming by the droves to take advantage of the ripe conditions for their work. So, here is a quick look at foreclosure and the scams that accompany it.

Foreclosures are a matter of public record in every state of the Union. Scam artists pretty well know when someone has defaulted on their mortgage loan. As a result, the scam artists are quick to prey on the weakest and most in need of help. They often portray themselves as someone who can lend a helping hand at a time those in financial trouble need it the most.

Here are a few things you might want to check out before investing in this kind of help relating to foreclosures:

  • Beware of Companies who will negotiate loan modifications for a fee. There are legitimate government sponsored loan modification programs, but none require a third party to help you negotiate the best deal for a modification to your mortgage contract to stay out of foreclosure. If you have defaulted on your mortgage loan, don’t be afraid to contact your mortgage service provider and tell them your predicament. They will put you in touch with a government backed modification program well before the foreclosure process is completed.

  • Beware of Companies who promise to negotiate with your mortgage company once you have defaulted on your loan. Some of these companies promise to get you fully reinstated with your mortgage lender for an upfront fee, no matter how many payments you have missed. Many of these scam artists call themselves foreclosure mediators or foreclosure counselors, but whatever they call themselves, there is really no such thing. Mortgage contracts are secured loans, and unless back payments are made in full, the mortgage lender is not likely to partially forgive a loan. To do so may void the entire contract, and the mortgage lender has the full force of the secured loan to protect. They have legal considerations a third party cannot intervene in, and to protect their security, they must follow the laws of the foreclosure process.

  • Beware of Companies who promise to buy your home through a secondary contract and without formally closing. Commonly called equity stripping, scam artists will promise to pay off your mortgage loan through a secondary contract to your primary mortgage agreement. They might even ask you to deed over the property to them, and some homeowners do, thinking the signing of the phony deed relieves them of ownership responsibility. The scam artists will rent the house out while the primary mortgage lender forecloses on the property, holding a legitimate lien on the title. Of course, you still owe the original loan the scam artist never paid. Closing at a title company is what protects both the homeowner and mortgage lender against such scams.

As irrational and stupid as it may seem, thousands of people are annually exposed to these types of scams, and many fall for them. Foreclosure is a legal process that often requires knowledge of the law, so when in doubt, it might be best to consult with a lawyer.

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