Mortgage Foreclosure Scams and How To Avoid Them

Remember, if it sounds to good to be true, it usually is and probably illegal.

The latest mortgage scam sends letters to homeowners claiming to be affiliated with the federal government promising that they could help homeowners arrange a mortgage loan modification for little or no cost. All they had to do was send their monthly mortgage payment directly to their mortgage modification consultants instead of their lender. They were told these funds would be held in a reserve account while they negotiated with your lender.

Instead the funds were used to cover the scammers expenses including buying cars and jewelry. Unfortunately instead of being helped, many of the homeowners found their mortgage in default. In this scam 400 homeowners in San Diego County lost a total of $1.5 million in two years before the scam was uncovered.

Here are five tips to help you avoid becoming a victim:

1. Never pay upfront fees. Foreclosure consultants are prohibited by law from collecting money before services are preformed. Instead call (888) 995-HOPE or visit www.995hope.org for a referral to a free HUD-approved housing counselor. They can educate you about loan modifications, short sales and other foreclosure alternatives.
2. Be sure to read the letters from your lender. Some lenders are sending letters to mortgage holders that may be elegible for a loan modification or principal reductions under the terms of the national mortgage settlement.  Only your lender can help you file a claim for assistance. For more information visit www.nationalmortgagesettlement.com.
3. Don’t transfer title or sell your home to anyone claiming to be able to bring it out of foreclosure by allowing you to stay in the home as a renter and purchasing it back in the future. This scheme generally includes a fraudulent bankruptcy filling and the scammer taking possession of the home and evicting the homeowner.
4. Don’t make mortgage payments to anyone other than your lender without the lenders approval. Scammers generally keep the money while your mortgage ends in default.
5. Don’t sign any documents without first reading them. Many times you are falsely led to believe that you are signing documents for a loan modification or principal reduction. To find out later that you actually transferred ownership to someone now trying to evict you. 

If you believe you have been a victim of a foreclosure scam, report it to the California Attorney General’s office or the Federal Trade Commission.

If your claim involves a real estate broker report it to the California Department of Real Estate. If your claim involves an attorney report it to the California Bar Association. You can also file a claim in Small Claims Court if your loss is less than $10,000.