Friday, March 30, 2007

Foreclosure "Rescue" Scams - DON'T FALL PREY!

What’s a Foreclosure "Rescue" Scam?

These scams revolve around heavily-promoted deals supposedly designed to save the homes of people facing foreclosure, those who've fallen behind on their mortgage payments.

But with frightening regularity this "help" from a "rescuer" either drains off the property’s built-up equity or leaves the "rescuer" owning the house outright – and the family evicted from their home.

In many cases it’s hard to escape the conclusion that that’s exactly what the "rescue" is designed to do.

The predominant foreclosure "rescue" scams appear to come in three varieties.

The first might be called "phantom help," where the "rescuer" charges outrageous fees either for light-duty phone calls and paperwork the homeowner could have easily performed, or on a promise of more robust representation that never materializes. In either event the homeowner is usually left without enough assistance to actually save the home but with little or no time left to prevent this grievous loss by the time s/he realizes it. The "rescuer" essentially abandons the homeowner to a fate that might well have been prevented with better intervention.

A second variety of the scam is the "bailout" that never quite works. This scenario includes various schemes under which the homeowner surrenders title to the house in the belief that s/he is entering a deal where s/he’ll be able to remain as a renter, and buy it back over the next few years. Homeowners are sometimes told that surrendering title is necessary so that someone with a better credit rating can secure new financing to prevent the loss of the home. But the terms of these deals are almost invariably so onerous that the buyback becomes impossible, the homeowner permanently loses possession, and the "rescuers" walk off with all or most of the home’s equity.

The third variety is a bait-and-switch where the homeowner does not realize s/he is surrendering ownership of the house in exchange for a "rescue." Many homeowners later insist that they believed they were only signing documents for a new loan to make the mortgage current.

Source: National Consumer Law Center Report

Richard's notes... If you are in financial trouble and your home is in foreclosure, don't wait until it's too late. Consult with a real estate professional, tax advisor, and the lender to find a solution to your problem.

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