foreclosure scams

Note! The following information should not be relied upon as legal authority. This information should supplement, not substitute, for the advice of competent legal counsel.

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Facing the threat of losing a home, a home owner will be plagued by individuals and companies offering to "help" the person out of his or her difficult financial situation. In most cases, these people are out for one thing--making money from someone's
problems. These scams will come in many shapes and varieties...ranging from direct mail offering to "negotiate" on behalf of the home owner for a nominal fee to people knocking on the door offering to help out by reinstating the loan, taking title and leasing the home back to the individual. People facing foreclosure are vulnerable to con-artists and scams. However, using a little common sense any home owner can avoid being taken advantage of and find a viable and ethical solution for his or her dilemma.

In California, a lender initiates the foreclosure process by filing a Notice of Trustee Sale with the county recorder. This notice is the equivalent of posting a large 50 foot neon sign above someone's house saying, "Here I am, take advantage of me!" because
shrewd individuals and companies know that the home owner is in trouble and will often times do anything to resolve the problem.

The following lists several ploys implemented by these individuals:

Short Term Loans. People may approach financially troubled home owners with the possibility of lending him or her a short term loan, and in some cases offer a loan with no payments for a certain period of time. These loans have high interest rates, require a balloon payments (where the home owner must pay off the loan by a certain date), or other features that may sound attractive. In reality, these loans are additional liens against a home and if the home owner fails to make a monthly payment or the balloon payment, the home owner could face foreclosure again.

Equity Splitting. Real estate agents (many claiming to be "pre-foreclosure" specialists) offer reinstate a person's loan and sell the house with the idea of salvaging any accrued equity and appreciation in the home. The catch is that the home owner must split the earnings with the agent instead of paying a commission. The reality is that the home owner could have hired a competent agent and accomplished the same end result with less money out of pocket.

Debt Negotiating & Counseling Agencies. Many companies, reputable and not-soreputable, offer to negotiate or consolidate the debt for the home owner. The catch is that the home owner must prepay for these services (many the home owner can do on his or her own accord). These individuals do not offer anything that you cannot do on your own or that other non-profit agencies will provide free of charge. If you need a debt negotiating agency, contact your local Consumer Credit Counselors.

“Financial Service” Companies. There has been a proliferation of individuals, often posing as a financial services company, that offer to assist home owners facing foreclosure with everything from tax advising, debt management, real estate sales and
pre-foreclosure sales. The reality of these individuals is that they do not run legitimate corporations (according the California Corporations Commission) and are not legally licensed as required by the California State Banking Department for debt or creditcounseling. Be wary of anyone who wears a thousand hats for any occasion or pay money for their services upfront!

Visitors. Expect many people, including investors and real estate agents, to visit your home. They will paper your house with flyers, knock on your door at all hours, and stalk you and your family until they have an opportunity to speak with you. The worse perpetrators are individuals posing as government employees dispatched to your home to assist you. The lender, the County, and the Federal government will not send out personal representatives to assist you unless you have initiated the call to the right agency.

Bankruptcy. No matter what an attorney may tell you, bankruptcy does not stop foreclosure. It is true that bankruptcy does suspend the foreclosure process. For more information on foreclosure and bankruptcy, go to our Ask The Expert.

There is free help and assistance for home owners facing the possibility of foreclosure. For more information on foreclosure and bankruptcy, go to our Ask The Expert.

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