Mortgage scams are like Baskin-Robbins offerings -- they come in 31 flavors.
"It's kind of become the new get-rich-quick scheme out there," says attorney Rachel Dollar, publisher of Mortgage Fraud Blog.
More than 323,000 properties entered some state of foreclosure in the first quarter of 2006, a 72% increase over the same period a year ago, according to RealtyTrac. And things could get worse: Nationwide, more than one in three outstanding mortgages has an adjustable rate and interest rates have been rising. "Nobody really knows what's going to happen," says RealtyTrac's Rick Sharga, vice president of marketing.
But scammers know that people in trouble make easy victims. They're swooping in and offering to "help" beleaguered borrowers -- and ending up with their house keys. Victims sometimes spend years fighting to get their homes back and some never succeed.
Do's and don'ts:
• Don't fall for promises like "We'll save your credit"; "We'll buy your house 'as is'"; or "We'll get you a new mortgage with low monthly payments."
• Don't sign away ownership of your property (sometimes called a "quit claim deed") to anyone without the advice of lawyer you trust. "When people get behind on their loan payments, they get a bit desperate, but the answer is not putting someone else on your title," says Oakland real-estate attorney James Hand.
• Beware of any home sale contract where you aren't formally released from liability for your mortgage. Also, make sure you know what rights you're giving up and that you agree to giving them up.
• Do call your mortgage company or lender if you're in trouble. Ask for the loss mitigation department. Contrary to popular perception, lenders don't want to steal your house, says attorney Dollar. They want to work with you. Why? "Lenders always lose money on foreclosures, even in a rising market," Dollar says. Scammers, on the other hand, will try to keep you from communicating with your lender.
• Don't call for assistance from one of those ubiquitous signs on telephone poles that advertise help. Chances are, that's not where help lies.
• Do proceed with caution, if a company or person:
o Describes itself as a "mortgage consultant," "foreclosure service," or something similar;
o Collects a fee before giving any services;
o Advertises to people whose homes are listed for foreclosure, including anyone who sends fliers or solicits door-to-door; and
o Says you should make home mortgage payments directly to them or to their company instead of your mortgage lender.
• Don't panic. Get full information on the foreclosure process in your state. Make sure you know ALL deadlines -- for court, for document filings, etc. States usually have associations that can offer free advice. For who to turn to for advice, click on your state here.
• Don't sign anything that has any blank spaces. Information could be added later that you didn’t agree to. (Yes, it happens.)
• Never sign a contract under pressure. Always know exactly what you're signing. Take your time to review the paperwork thoroughly -- ideally with a lawyer who only represents your interests.
• Never make a verbal agreement. Get all promises in writing and get full copies.
• Cast a jaundiced eye at deals that sound too good to be true. Lately, some scam artists promise they'll wipe out or pay off your home's debt for you (so-called "debt elimination"). Some flustered homeowners bite. Just remember the free lunch rule: There isn't one.
A final thought: Remember, if you can't fix your finances, selling your house (on the normal market, that is) may not be the end of the world. Sure, you'll be a renter again. But given how much homes around the country have appreciated in the last several years, chances are you've made some money, which you can use to get back on your feet.
Source of tips: National Consumer Law Center; U.S. Department of Justice's U.S. Trustee Program; attorney Rachel Dollar
Abraham Martinez
Ocean View Int'l Realty, Inc.
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