Foreclosures And Rescue Scams

Posted in Foreclosure, March 19th, 2008 |

Foreclosure rescue scams are nothing new – they have always been there. It is just that recently they have reared their ugly heads to catch the limelight. Broadly there are three types of foreclosure rescue frauds.

The foreclosure rescuer charges excessive fees for ordinary phone calls – something that the borrower can easily do but does not do so because of the psychological state that the person is in. Taking advantage of the trauma the rescuer promises hope and succour but actually disappears with money at a time when the money problems are high. By hobnobbing with the scammers further damage is done by way of wasting time and not contacting bonafide counselors.

In the bail out method of fraud the victim of foreclosure is tricked into signing over the title on the good faith that he or she will be able to continue to remain in the house by being a renter and eventually with time will be able to buy back the house. But actually the terms of the agreement are so complicated and dubious that the owner never gets such an opportunity. Ultimately eviction takes place and the scammers walks away with the house.

A third type of foreclosure fraud is the bait and switch kind. The borrower signs papers thinking that the mortgage will become current but actually they are surrendering their title. Until eviction they do not even know the implications of that signature. It is very cleverly done. The fraudsters puts the ownership in a trust in the name of the owner in order to by-pass the clause of ‘due-on-sale’ present in most of the mortgages. Then they transfer ownership to themselves or to a third party they themselves have put up as a front. The house owner meanwhile continues to pay the mortgage on a house which he or she no longer owns.

The question is – why do the foreclosure victims fall prey to these predators? Primarily because they sign the original mortgage without understanding the paper works – in other words financial ignorance. The lenders do not explain it to them in easy language. There are many points that should be understood – time limit and rights of owners. Another reason is that the borrowers shy from talking with the lenders and spelling out their difficulties. There is a sense of shame that prevents them from coming forth. They take the blame on themselves to disastrous consequences making things worse.