Increased consumer vigilance is nevertheless part of fighting the scammers. The following advice for homeowners facing foreclosure or having trouble paying their mortgage, from the federal Department of Justice’s U.S. Trustee Program, is as good a place to start as any:
Proceed with care if an individual or company:
- Calls itself a "mortgage consultant," "foreclosure service," or something similar.
- Contacts or advertises to people whose homes are listed for foreclosure, including anyone who sends flyers or solicits door-to-door.
- Collects a fee before providing services to you.
- Tells you to make your home mortgage payments directly to the individual or company (and not the mortgage lender).
- Tells you to transfer your property deed or title to the company.
Contrary to advice given by many scammers, homeowners in trouble SHOULD stay in touch with their mortgage company, contacting the company or a lawyer first when in trouble. There are many ways to prevent the loss of your home, or at least to walk away with all or most of its built-up equity if all else fails.
And don’t be afraid to seek help! As several lawyers we interviewed told us, people in distress either don’t exercise their rights or think that what’s happening to them is just a price they have to pay for financial trouble.
But in most cases you DON’T have to lose your home or a big slice of its built-up equity to get out of a debt jam. At worst an orderly sale of this precious asset may leave you a renter again, but at least you’ll take away the stored-up cash you’ve accumulated in your house through rising home values or years of payments.
In today’s real estate market even a few years of ownership may have produced tens of thousands of dollars of increased value over what you owe on the house. That money is yours, and it can help get you back on your feet or secure your future. Don’t part with it without closely examining all your options first!
Some major DON’Ts for homeowners in trouble
Don’t panic. Get full information on the foreclosure process in your state and especially how much time you have to resolve your problems short of losing your home. Make sure you understand all deadlines for responding to court documents, documents from lenders and other important papers. Be especially sure that you know the point at which you can lose the legal right to own your home.
Never sign a contract under pressure. Take your time to review the paperwork thoroughly, preferably with a lawyer representing your interests only.
Don’t sign away ownership of your property (often referred to as a "quit claim deed") to anyone without advice from your lawyer. Be especially suspicious of offers to take over ownership of your home as part of a deal that will allow you to lease it then buy it back after two or three years’ time; Experience shows that the buy-back is often extremely expensive or otherwise out of reach, so in reality you either never get your home back or, if you do, you’ve paid an outrageous amount to recover it.
Don’t pay your mortgage payments to someone other than your lender even if he/she promises to pass them on to the mortgage company. And if you find you can't pay your mortgage don’t ignore warning letters from your bank or mortgage lender. Call your lender or a lawyer for help.
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.
Never make a verbal agreement. Get all promises in writing and get full copies.
Don't sign anything with blank lines or spaces. Information could be added later that you didn't agree to.
Don’t fall for promises like these, often used to lure homeowners into deals that
will cost them far, far more than they’ll "save."
- "We’ll save your credit"
- "We’ll pay the closing costs"
- "We’ll pay your first two months’ rent or payments in your new place"
- "You’ll 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’ll buy your house ‘as is’"
- "We guarantee we’ll find you a buyer in seven (or 14) days" (but at what price?)
- "We’ll get you a new mortgage with low monthly payments" (without telling you how much is borrowed or how many years’ worth of payments.)
- "We’ll help you file bankruptcy to stop this foreclosure" (bankruptcy only buys time to fix your
finances but doesn’t stop a foreclosure; if you go this route make sure the person offering help – preferably a reputable bankruptcy attorney -- really knows what he or she is doing.) - "It may cost you thousands more if your property is sold at public auction"
- "We’ll give you $40.00 in Free Gas"
If you’re not English-speaking use your own translator; do not depend on the "rescue" firm’s translator or anyone else’s.
The tips are from a report published by the Consumer Law Center in Washington and
the U.S. Justice Dept.