Don’t Be Foreclosed Upon by a Scam: Know Your Rights
Foreclosures are once again on the rise. Many Americans face challenges in a time of high housing costs, rising mortgage rates, economic uncertainty, and the end of COVID-19 foreclosure protections. According to a recent report from MarketWatch, foreclosures are up in every state. In the first quarter of 2022, there was a 67 percent quarterly increase in new foreclosures compared to the fourth quarter of 2021 and 188 percent compared to the prior year.
Sadly, foreclosure scams remain a very serious problem. Unscrupulous parties try to take advantage of homeowners facing foreclosure who are struggling and desperately trying to save their homes.
At the Law Offices of Wenarsky & Goldstein LLC, we want to ensure people have the knowledge and resources to avoid scams. Our New Jersey foreclosure attorney highlights some of the most common foreclosure scams and shares tips on protecting yourself.
How Do Foreclosure Scams Work?
Foreclosure scams are schemes designed to trick homeowners into giving away their money, home or both. Often the con artists target vulnerable homeowners who may not fully understand foreclosure laws and procedures.
Typically, a scammer will approach a homeowner with an offer that is too good to be true. They might promise to save your home from foreclosure for an upfront fee or tell you they can eliminate your mortgage debt. Unfortunately, these promises are often empty and the homeowner ends up losing their money and home.
Four of the Most Common Foreclosure Scams
Internet and Phone Foreclosure Scams
With internet and phone foreclosure scams, fraudsters try to find struggling people. They will then make them false promises that they can help them save their home. You will often be asked for some form of payment.
In reality, these scammers are typically just trying to take your money. The scammer will misrepresent their services—and maybe even their identity—to get as much as possible out of the victim.
Mortgage Refinance Scams
While there are legitimate mortgage refinancing services, scammers often tout significant refinancing to take advantage of desperate homeowners.
A scammer may pose as a mortgage broker. They may even tempt you with wholly fraudulent mortgage foreclosure rescue documents to try to get an initial payment out of you before they run away without doing anything at all to save your home.
Foreclosure rescue scams and mortgage modification scams are a growing problem, so much so that even the U.S. Department of the Treasury has published tips on how to avoid them.
These tips highlight that you should be aware of anyone seeking to charge you for mortgage modification services in advance since, in most cases, that’s illegal.
Also, bear in mind that only your mortgage servicer can grant a loan modification, and only they can determine whether you qualify for one. Furthermore, paying a third party to assist with your application doesn’t improve the likelihood of receiving a mortgage modification.
Scams on Lease-Back and Repurchase
Be very skeptical of a lease-back and repurchase strategy as a tool to avoid foreclosure. It is one of the most common types of mortgage foreclosure scams. A scam operator will convince the homeowner to “sign over” the deed to the property. They promise to clear the delinquent debt and repair your credit while allowing you to stay in your home. Most often, they are simply trying to push you into an unfair agreement through which they can take your property through an eviction.
Equity Skimming
Equity skimming is a type of foreclosure scam through which a scammer will try to access your property to squeeze out any remaining equity. They will try to tell you to “give” them the property and move out immediately. They will then take over your mortgage payments and rent out the house. In reality, equity skimming means collecting as much rent as possible while not making any mortgage payments. The house could quickly end up in foreclosure.
Other Foreclosure Scam Tactics:
- Phantom help: A scammer may claim to be a counselor or expert but is only out for your money.
- Bait-and-switch: A homeowner thinks they are signing documents to bring the mortgage current. Instead, they unwittingly sign over ownership of their home.
- Fake government programs: Scammers often pose as government agencies or affiliated with government programs to defraud homeowners.
Digital Impersonation: The Latest in Common Foreclosure Scams
Loan modification scams have evolved into sophisticated digital threats. The FBI reports foreclosure rescue scams increasingly target homeowners through technology, with scam artists creating fake financial institutions’ websites to intercept mortgage payments directly.
Scammer promises often include fraudulent forensic loan audit services, while attempting to access your credit report or property deed. The foreclosure process becomes more complicated when victims of foreclosure fall prey to these schemes. The scammer may tell individuals not to contact their housing counselor or an attorney. Once they pay the fee, the scam artist takes off with their money without providing you any meaningful assistance.
Before you sign paperwork or engage with any foreclosure rescue company, verify their legitimacy through your lender and the attorney general’s office. Common scams now use AI-generated voices to impersonate loan officers, threatening home ownership stability. The foreclosure action prevention industry has seen legitimate financial institutions compete with sophisticated fraudsters.
Remember: never trust unsolicited mortgage assistance offers, and verify all communications through your lender’s official channels. Report suspected digital impersonation scams to your lender and local law enforcement immediately.
Legal Protections and Your Right to Report Foreclosure Scams
Federal regulations provide strong protections against loan modification scams and foreclosure rescue scams. The Mortgage Assistance Relief Services (MARS) Rule, enforced by the Federal Trade Commission, specifically prohibits companies from charging upfront fees for loan modification services. Under this rule, only your mortgage servicer has the authority to approve any mortgage modification request.
Attorney general offices across all states maintain strict regulations against modification scams. These consumer protection laws make it illegal for third parties to collect advance payments for mortgage debt relief services. Your state attorney general enforces these protections and investigates fraudulent foreclosure rescue operations.
Where to Report Foreclosure Scams:
- Federal Trade Commission: reportfraud.ftc.gov or 1-877-FTC-HELP
- Consumer Financial Protection Bureau: consumerfinance.gov/complaint or 1-855-411-CFPB
- Your State Attorney General: Contact your local attorney general office
- Office of the Comptroller of the Currency: helpwithmybank.gov for national bank issues
Additional Foreclosure Scam Types You Must Recognize
Bankruptcy Foreclosure Scams exploit homeowners considering bankruptcy protection. Scammers falsely promise that filing bankruptcy will permanently eliminate mortgage debt. These bankruptcy foreclosure scams charge excessive fees while providing no legitimate legal assistance.
Debt-Elimination Schemes claim they can make your mortgage debt disappear entirely through “secret” legal loopholes. These modification scams target desperate homeowners with promises that sound too good to be true. Remember: legitimate loan modification programs reduce payments, but they don’t eliminate mortgage debt completely.
Straw Buyer Scams involve fake purchasers who claim they’ll buy your home and rent it back to you. The scammer collects your deed and any equity while you remain responsible for the original mortgage debt. Your mortgage servicer never receives proper notification of ownership transfer.
Complex Refinancing Scams use confusing paperwork to hide predatory terms. These foreclosure rescue scams promise amazing new loan modification terms but actually transfer property ownership to the scammer.
“We Buy Houses for Cash” Warning Signs and Red Flags
“We Buy Houses for Cash” companies often use aggressive marketing tactics that signal potential scams. Legitimate cash buyers don’t pressure homeowners into quick decisions about mortgage modification alternatives.
Major Red Flags:
- Unsolicited phone calls or door-to-door visits offering immediate cash
- Pressure to sign documents without attorney review
- Promises to handle all communication with your mortgage servicer
- Requests for deed transfer before payment
- Claims they can stop foreclosure within 24-48 hours
- Offers significantly below market value with “take it or leave it” terms
The Federal Trade Commission warns that legitimate real estate investors provide time for due diligence. They don’t demand immediate signatures or claim special relationships with your mortgage servicer.
Government Program Impersonators and Verification Methods
Scammers frequently impersonate federal and state assistance programs to steal money and personal information. These fake programs often mimic legitimate loan modification resources while charging illegal upfront fees.
How to Verify Legitimate Programs:
- Contact your mortgage servicer directly using official phone numbers
- Visit official government websites ending in .gov
- Verify through your state attorney general consumer protection division
- Check the Federal Trade Commission database of approved counselors
Real government assistance programs, like HUD-approved housing counselors, never charge fees for loan modification consultation. Only your mortgage servicer can provide official information about available mortgage modification programs for your specific situation.
Remember: the Federal Trade Commission and state attorney general offices maintain lists of legitimate foreclosure rescue services. When in doubt, verify any mortgage modification offer directly with your mortgage servicer before providing personal information or payment.
How to Protect Yourself from Foreclosure Scams
Foreclosure scams often target people who are afraid and under financial pressure. They will not hesitate to scam you out of the last few dollars in your account. Here are some helpful tips on how to protect yourself from foreclosure scams:
Be Wary of Promises and Pressure
- Guarantees: No reputable company can guarantee the stopping of foreclosure. Beware of anyone making such claims.
- Urgency: Scammers often pressure you to act quickly, claiming limited-time offers. Take your time, and don’t be rushed.
- Upfront Fees: Legitimate services rarely require an upfront fee. Be wary of anyone demanding money before providing help.
Do Your Research
- Company: Check online reviews, ratings, and complaints. Verify their registration with relevant organizations like the Better Business Bureau.
- Individual: If dealing with someone directly, research their background and licenses. Never share personal information without verification.
- Options: Explore options like loan modification, forbearance, or refinancing before considering any service. Some government programs offer free assistance.
Protect Yourself
- Never sign blank documents or those with errors/false statements.
- Read and understand everything before signing. Seek legal advice if needed.
- Never share financial information or make payments directly to the service provider. Pay your mortgage lender directly. If you are unsure, contact your lender to verify the legitimacy of any request.
- Report suspicious activity to authorities like the Federal Trade Commission or your state’s Attorney General.
There are Real Options Available: An Experienced Lawyer Can Help
The unfortunate reality is that people and families who are facing mortgage foreclosure remain a target of scammers and fraudsters. These bad actors know that people desperately want to save the house that they turned into a home. Sadly, unscrupulous individuals and companies exploit the situation by providing false hope. They use false hope as a means to commit fraud.
Some good news: real legal options are available for financially distressed homeowners. While pandemic-related foreclosure protections have faded, New Jersey has made dedicated funding available to help people. You may qualify for assistance through the New Jersey Emergency Rescue Mortgage Assistance (ERMA) program.
Another potential option is bankruptcy protection. Depending on the specific circumstances of your case, consumer bankruptcy protection could potentially stop and fix a mortgage foreclosure. An experienced attorney like New Jersey and New York bankruptcy lawyer Wenarsky & Goldstein will help you navigate the legal process. They will also ensure you don’t fall victim to foreclosure scams.
Don’t let scammers take advantage of your situation. Explore your legal options and seek professional assistance to protect yourself and your home.
Call Our New Jersey Personal Bankruptcy and Foreclosure Attorney Today
If you are struggling with mortgage foreclosure or have questions about your financial situation, contact an experienced bankruptcy and foreclosure attorney today. An experienced lawyer can help you explore options to protect your home and financial future.
At the Law Offices of Wenarsky & Goldstein LLC, we are committed to helping our clients navigate some of life’s most significant financial challenges. If you have any questions or concerns about bankruptcy, foreclosure, and your legal options to save your home, our legal team is here to help.
Contact us today to set up a completely confidential consultation with an attorney. We provide personal bankruptcy and foreclosure representation throughout North Jersey and New York.
