When homeowners struggle with serious financial challenges and find themselves at risk of losing their homes, they often search for any way possible to stop foreclosure. Unfortunately, the desperation and helplessness experienced by many homeowners facing foreclosure make them targets for mortgage fraud or foreclosure fraud. The incidents of mortgage and foreclosure fraud have increased in recent years, often taking the form of short sale scams or foreclosure rescue and loan modification scams.
A national public education campaign has been created to warn homeowners and help them identify common warning signs of mortgage fraud. In general, when a person or organization requests an up-front fee prior to working with or negotiating with a lender to make changes or modifications–including modifying terms, refinancing or reinstating a mortgage–it is not a good sign. Guarantees of successful loan modification or foreclosure prevention also commonly indicate fraud. In many cases, individuals or organizations involved in mortgage fraud will recommend that a homeowner pay the individual/organization instead of the mortgage company, sign over the deed to the home, or sign other complicated paperwork.
Claims that a particular tactic or loan modification strategy is approved by the government or associated with the government are often false, warning of fraud, as well as are requests for personal information relating to finances made over the phone or online. Any homeowner who experiences any of these activities or suspects fraud is advised to report it immediately.
Foreclosure fraud scams tend to target homeowners who are already struggling and facing the risk of foreclosure. These scams often promise foreclosure prevention assistance but collect exorbitant up-front fees and often fail to successfully perform any of the services guaranteed or discussed. Many foreclosure fraud scams involve a homeowner signing over the title of the home to the individual or organization conducting the scam.
In many cases, the individual or organization allows a homeowner to remain in the home during the “foreclosure prevention” process but charges the homeowner rent during this time with the promise that the homeowner can repurchase the home in the future. Homeowners who fall victim to these scams often end up losing their homes because the organization claiming to assist them fails to make the mortgage payments or later sets an unreasonable price for repurchase of the home.
Source: FreddieMac.com, “Avoiding Fraud,” accessed on Feb. 25 2015
