The idea of losing your home to foreclosure can cause a lot of stress in your life. If you're having a hard time making your mortgage payments or are facing foreclosure, you have rights. More important, there may be options to help you save your home. Prepare yourself to handle a foreclosure by understanding:
- How to recognize a foreclosure rescue scam
- Steps to take when facing foreclosure
- Ways to negotiate with your lender
- Ways to report fraud and abuse
Foreclosure scams are real, and they can make a bad situation even worse. Although many companies make great claims, know the warning signs of a scam, and be sure to do your research to find a reputable company to help you. Service members are often targeted by scammers because they know that military families move a lot, and buying homes instead of renting can be more cost effective. Just remember: if it sounds too good to be true, it probably is.
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How to recognize a foreclosure rescue scam
Chances are you're face-to-face with a scam if a business or person does any of the following:
- Guarantees to stop your foreclosure. Nobody can make that promise.
- Promises instant credit repair services. Again, nobody can make that guarantee.
- Instructs you to not contact your lender, your lawyer or your credit housing counselor. Those advisors are there to help you in situations like this, so contact them before you contact anyone else.
- Offers to fill out the paperwork for you. Don't give in to pressure to sign paperwork that you haven't read thoroughly or that you don't understand.
- Offers to buy your house. Be suspicious if someone offers to buy your house at a fixed price that's not set by the housing market at the time of the sale.
Scammers are smart. They research local properties to find out which homeowners are in danger of foreclosure, then reach out to those homeowners with mailings, emails, fliers and business cards that all offer to help you out of your financial difficulties. Once you make contact, the scammer will try one or more of these tactics to get your money:
- Asks for a fee up front. The scammer promises to negotiate a deal with your lender to save your house if you pay a fee first. Then he or she disappears with your money. Sometimes the scammer will pocket your money and file a bankruptcy case on your behalf. The bankruptcy stalls the foreclosure but doesn't stop it, and you're left to deal with a bankruptcy that's devastating to your credit.
- Gets you to divert mortgage payments to him or her. The scammer tells you to make payments out to him or her instead of to your mortgage lender, then takes off with your money.
- Tricks you into surrendering the title to your home. The scammer asks you to sign documents that will bring you up to date on your existing loan and give you a new one — but those documents actually surrender the title to your property in exchange for a rescue loan.
- Offers you a rent-to-buy deal. The scammer tells you to surrender the title to your home in exchange for staying there as a renter (with the scammer as your landlord). You're told you can buy your home back over time, but the scammer adjusts the rental agreement so that you can no longer afford to live there and eventually evicts you.
- Offers to sell your home for you. The scammer offers to find a buyer for your home and pay you a portion of the profits if you sign over the deed and move out. Once you transfer the deed, the scammer rents the house instead of selling it and keeps the rent money instead of paying the mortgage. Your lender forecloses on the property, you lose the home, and you're still responsible for the unpaid mortgage.
- Offers to conduct a forensic loan audit. This type of scammer charges a hefty fee to search for loopholes in your mortgage loan documents that will supposedly help you avoid foreclosure. The problem is that lenders aren't required to make changes to a loan because of errors in the documents, and if you cancel the loan, you'll lose your home and have to return the money you borrowed from the lender.
Steps to take when facing foreclosure
Contact your lender immediately if you've fallen behind on your mortgage payments and have received a foreclosure notice. Ask about the following options:
- Reinstatement. You pay the loan servicer the entire amount that's past due, plus any late fees and penalties by a date you both agree to. This may be an option if your financial troubles are temporary.
- Negotiating a repayment plan. You pay the amount you owe by adding it to future mortgage payments. This may be an option if you missed only a few payments.
- Forbearance. Your mortgage payments are reduced or suspended for a period of time, after which you start making your regular payments again and pay back the portion that was suspended. This may be an option if your income is reduced temporarily, like during a deployment.
- Loan modification. The terms of your mortgage contract are adjusted to make payments more manageable. This option comes with some tax implications.
File a complaint on the Consumer Complaint Database at the Consumer Financial Protection Bureau if you have an unresolved issue with a company about a financial product or service. Contact the Federal Trade Commission if you're a victim of fraud.