With foreclosures on the rise due to the “subprime” mortgage meltdown there are more and more credit repair and foreclosure rescue “specialists” that promise to solve the problems of the defaulting homeowner. Some of these individuals are providing their clients with valuable expertise and some relief (due to the overreaching actions of the lenders and mortgage brokers that fueled the subprime crisis) however there are a lot of unscrupulous confidence artists who are entering this field with the hopes of scamming innocent victims out of their hard earned dollars.
These scams usually involve the signing of an agreement with the foreclosure rescuers. They may require the victim to be taken to a location to sign legal papers with an unknown lawyer (via taxi, limo or car service) who assures them that everything is “fine”. The meeting is not at a lawyer’s office but at a “instant” conference center that is rented by the hour. As many states do not require lawyers to be at all closings or refinances many individuals do not find it suspicious that someone would suggest that they sign papers without them first being reviewed by a lawyer. Typically the house is sold for a lower price that pays off the old mortgage; there is a “side” agreement that indicates that the house will be resold to the victim after their credit is rehabilitated. However the person who promises this sale is not the purchaser of the house but a shell corporation that has absolutely no right or obligation to “resell” the property back to the victim. The purchaser then resells the house at the market rate and takes out more equity from the house and it is then allowed to go into foreclosure. Usually someone purchases the house for their “friend” and only later they discover that their “friend” who promised to pay the mortgage payments never had any intention of repaying the bank. Thus there are several victims in this type of scam.
The individual or family is allowed to remain in the home for several months and thus they believe that everything is fine until one day they discover that the home has been sold to a third party who may even try to evict them. It is only then that these victims realize their house has been sold right out under them and that any equity that they previously had has now disappeared and they may face becoming homeless.
This is just one variation of these kinds of scams. They are also done through renovations companies that find elderly victims without mortgages or debts whose homes have appreciated substantially. These individuals are coached to take out a loan to finance needed renovations, often basic things like roofs, siding, new windows. The renovations “contractor” convinces the homeowner to fill out all the necessary paperwork and then he takes it to his mortgage broker who prepares a package for the unsuspecting homeowner. Once again, the elderly person looks up to this individual who has come to their home, convinced them they need repairs and renovations (and maybe even done a few for free) and gained their trust. Then, the individual is taken by a taxi or limo service to a location in a different part of town — being distracted as to the actual address — and in a non-descript office building given a package of closing documents to sign under the eye of an unscrupulous lawyer. Then the individual, without realizing it, signs a power of attorney or authorization for the “contractor” to take the proceeds of the closing. Well with the funds in hand and a mortgage on the home owners property the scam artist quickly disappears with the proceeds (after promising the homeowner that work would begin in a few days). Finally the homeowner waits for the contractor to start work only to find that the phone number that she or he was given has been disconnected and that the “contractor’s” office was located at an instant office center or mail drop without forwarding address or any traceable physical location the victim can find.
If a salesman or company promises you that can save your home or fix your credit, are willing to pay closing costs (and get you a lawyer). If they tell you they will buy your home quickly and easily but allow you to keep living in it, you should be extremely careful before dealing with such schemes and seek competent legal advice before signing any document even if it is just a memo drafted by a salesman at your kitchen table.
Remember, you can not stop a foreclosure by signing the property over to a third property (though that may delay being evicted for months or even years). You can not repair your credit overnight, it can only be ameliorated over time. If it seems to good to be true, remember that in all likelihood it is a scam.
Remember scam artists or confidence men are always on the lookout for a target or mark. They are often very intelligent, good looking, well dressed and sociable individuals. Don’t let this superficial friendliness fool you. If anyone asks you to pay upfront for renovations or sign a “standard” agreement for their services without consulting a lawyer, don’t do it, you may find that you have signed your property rights away without even been aware of it. Never agree to make your mortgage payments to anyone but your lender. Never sign a power of attorney or sign a blank deed transferring property or title without first consulting an independently chosen and trusted attorney.
External link: BBB Foreclosure Scam Alert
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