Avoid Foreclosure Scams:
11 “Don’ts” for Homeowners in Financial Distress
Taken from Foreclosure Prevention Counseling:
Preserving the American Dream, National Consumer Law Center 2007
- Get information on the foreclosure process in your state. Find out how much time you have to resolve your problems. Make sure you understand all the deadlines for responding to documents from the court, your lender, your lender’s attorney.
- Ask a lawyer to review any contract you are asked to sign. Make sure this is an attorney that you have chosen without any help from the person who wants you to sign the contract. If the other party discourages your seeking counsel, it’s a sign that they might have something to hide.
- Never sign a contract under pressure. Take your time to review the paperwork thoroughly, preferably with a lawyer who is representing your interest.
- Do not sign away ownership of your property (often referred to as a “quit claim deed”) to anyone without advice from your lawyer. Be suspicious of offers to take over ownership of your home as part of a deal that will allow you to lease it and then buy it back after two or three years; experience shows that the buy-back is often extremely expensive or otherwise out of reach.
- Do not pay your mortgage payments to someone other than you lender, even if he or she promises to pass the payments on to the mortgage company.
- If you find you cannot pay your mortgage, do not ignore warning letters from your lender. Call your lender, housing counselor, or lawyer for help.
- Beware of any home sale contract where you are not formally released from liability of your mortgage. Some people lose their home but still wind up owing on the mortgage! Make sure you know what rights you are giving up in any contract.
- Never make a verbal agreement. Get all promises in writing and get copies of the agreement.
- Do not sign anything containing blank lines or spaces. Information can be added later without your permission.
- If you do not speak English, use your own translator. Do not depend on the “rescue” firm’s translator.
- Do not fall for promises like these, often used to lure homeowners in to deals that will cost them a lot more than they will “save”:
- “We will save your credit”
- “We will pay your first two months’ rent or payments in your new place”
- “You will get several thousand dollars in cash back that you can use any way you want”
- “If you sign the house over to us, the foreclosure will be recorded against us, not you”
- “we will buy your house ‘as is’”
- “We guarantee we will find you a buyer in seven or fourteen days”
- “We will help you file bankruptcy to stop this foreclosure”
- “It may cost you thousands more if your property is sold at public auction”
- “We will give you $40 in Free Gas”
- For more information on foreclosure scams, visit the Federal Trade Commission
- Visit Making Home Affordable to verify you are working with a HUD-approved housing counseling agency and beware of anyone who asks you to pay a fee in exchange for a counseling service or modification of a delinquent loan.
Predatory Lending and What to Watch Out For
Taken from Department of Housing and Urban Development 2014
In communities across America, people are losing their homes and their investments because of predatory lenders, appraisers, mortgage brokers and home improvement contractors who:
- Sell properties for much more than they are worth using false appraisals.
- Encourage borrowers to lie about their income, expenses, or cash available for down payments in order to get a loan.
- Knowingly lend more money than a borrower can afford to repay.
- Charge high interest rates to borrowers based on their race or national origin and not on their credit history.
- Charge fees for unnecessary or nonexistent products and services.
- Pressure borrowers to accept higher-risk loans such as balloon loans, interest-only payments and steep pre-payment penalties.
- Target vulnerable borrowers for cash-out refinance offers when they know borrowers are in need of cash due to medical, unemployment or debt problems.
- “Strip” homeowners’ equity from their homes by convincing them to refinance again and again when there is no benefit to the borrower.
- Use high pressure sales tactics to sell home improvements and then finance them at high interest rates.
Visit the Consumer Financial Protection Bureau to submit a complaint if you have been a victim of predatory lending.