Before the global pandemic came crashing into our lives, foreclosures were at an all-time low. Unfortunately, that might not be the case for much longer. As of July 31, 2021, the two protections under the Cares Act that aided borrowers in financial distress due to the COVID pandemic — the foreclosure moratorium and the forbearance program that allowed borrowers to stop making loan payments temporarily — came to an end. Homeowners who fell behind on their home loans found refuge for a time, but what happens now?
Not surprisingly, many homeowners feel unsettled at the dissolution of a financial reprieve that lasted more than a year and now fear that they must look forward to a staggering rush of deferred debts.
However, at the Biden administration’s request, another temporary lifeline was thrown to borrowers with government-backed loans who couldn’t make their payments. As a result, VA, HUD, FHFA, and USDA have extended their foreclosure-related eviction moratoria until September 30, 2021.
That temporary fix, while welcome, still leaves more than 2 million homeowners with loans teetering on the edge of default. That’s 2 million people desperate to avoid foreclosures, leaving them vulnerable to scammers who see opportunities ripe for the plucking. These con artists work by gaining your trust, taking your money, and leaving you in further crisis.
Scammers give their companies legit-sounding names
Greed motivates these dishonest companies, and they cloak their lack of ethics in familiar names designed to instill confidence from homeowners desperately seeking ways to avoid losing their homes. For example, they might advertise as mortgage or foreclosure consultants offering foreclosure services. You’ll even spot them as a foreclosure rescue agency or loan modification company, claiming that they provide options that will allow you to keep your property, modify or refinance your current mortgage. They’ll try to convince you that they have the power to buy you more time with your lender. The bottom line is that they want your money, and not in exchange for legitimate assistance. The Federal Deposit Insurance Corporation (FDIC) warns of these scams. Here are some typical foreclosure rescue and loan mod scams:
Lease-back or repurchase scam
The scammer not only promises to pay off your delinquent mortgage and repair your credit, but they might also offer to pay off your credit cards and other assorted debt. But, wait, there’s more. Before they can implement this daring rescue, you’ll have to sign your deed over to a third-party investor – “but only temporarily, of course,” they’ll tell you. Your generous benefactor allows you to remain in your home, but you’ll have to pay rent. Hey, don’t worry because you’ll also have the option to buy back your house after a specific amount of time or if your financial situation improves. Forget it. You can kiss your home goodbye at this point. Once you’ve signed away your rights to your property, you’re no longer the owner. And when the new owner takes over, they can evict you. You can count on it because that was the plan all along. Remember, you signed your house away, and the scammer is under no obligation to sell it back to you. After the deed is signed away, the property often changes hands numerous times. The scammer may have taken a new mortgage out on your home for hundreds of thousands of dollars more than your original mortgage, making it impossible for you to buy back your home.
Partial interest bankruptcy scam
This scam requires the unsuspecting homeowner to place a boatload of trust in a stranger – with disastrous results. The swindler asks you to give a partial interest in your home to one or more persons. Instead of paying your delinquent mortgage to your servicer, you make the mortgage payments to the swindler you assume is your foreclosure rescuer. Unfortunately for you, the scammer doesn’t pay the existing mortgage. Next, each person holding a partial interest in your home then files bankruptcy, one after another, without your knowledge. The bankruptcy court will issue a “stay” order each time to stop foreclosure temporarily. You should know that the stay won’t excuse you from making payments or repaying your loan’s total amount. These stays complicate and delay the foreclosure, which is exactly what the scammers want because it allows them to maintain a stream of income by collecting payments from the victim – you. By design, bankruptcy laws provide significant protections to consumers. However, this scam only temporarily delays foreclosure, and in the meantime, it may keep you from using bankruptcy laws legitimately to address your financial problems.
Of course, you can find plenty of legitimate refinancing programs, but look out for people posing as mortgage brokers or lenders offering to refinance your loan to lower the payments. This scammer offers foreclosure rescue loan documents for you to sign. They tell you that the documents are for a refinance loan that will bring the mortgage current. However, what you’re doing, without knowing it, is surrendering ownership of your home. Those “loan” documents are deed transfer documents, and the scammer is counting on you to merely skim the paperwork. After all, how often do we read every word in legal documents? Once the deed transfer is executed, you’re relieved because you’ve been led to believe your home has been rescued from foreclosure. The devastating reality becomes apparent when you receive an eviction notice and discover you no longer own your home. More often than not, it’s too late to do anything about the deed transfer at that point.
Internet and phone scams
The internet and telephone offer fertile grounds for scammers. These scam lenders try to convince you to apply for a low-interest mortgage loan over the phone or the internet. If you’re caught off-guard, they’ll easily extract vital information, such as your social security and bank account numbers. In this scam, the crooks immediately accept the loan, after which you start faxing the documents and sending wire transfer payments to the non-existent company without ever meeting the lender. As you might imagine, this insidious scam will double your trouble. Not only have your personal details been stolen and probably sold, putting you at risk of identity theft, but your home is still at risk of foreclosure. Also, you should be on high alert if you receive an email with a COVID-related subject. Scammers can send emails that offer assistance with your loan and contain malicious attachments or links to fraudulent websites that steal sensitive information. Remember, never click on links in unsolicited emails and never open attachments from senders you don’t know. And even if you do receive an odd-looking attachment from a familiar sender, delete it without opening it. Contact the person or company directly to see if they sent you the information.
Phantom help scam
In this scam, the phony operators present themselves as having the ability to help you out of foreclosure or helping you to qualify for a government loan modification or refinance program. In exchange for their services, which, remember, are not legitimate, they’ll charge you exorbitant fees and make inflated promises they never intend to keep. Moreover, the “services” they perform might entail no more than some light paperwork or a few phone calls that you could easily have made yourself. In the end, you’re in worse shape than before because the clock has run out, and you’re left with little or no time to seek legitimate help to keep from losing your home.
How to spot mortgage foreclosure and loan modification scammers
Heed these warning signs to save yourself a lot of trouble. They might be scammers if they do the following:
- Demand a fee in advance. Legitimate organizations that work with borrowers to avoid foreclosures never ask for upfront money.
- Make unsolicited offers or “lofty” advertisements, claiming they can help save your home.
- Offer to negotiate a loan modification for a fee.
- Recommend you break off contact with the lender and any counselor that you may have been working with.
- Suggest you stop making mortgage payments.
- Instruct you to send your mortgage payment to anyone other than your loan servicer.
- Ask you to transfer ownership of your property.
- Make verbal promises they won’t put in writing.
- Ask you to sign a document that has blank lines or spaces.
Where to find legitimate help when you’re in financial distress
If you’re struggling to make your house note, contact your lender, or loan servicer as soon as possible for legitimate options. You also can find resources at the U.S. Department of Housing and Urban Development (hud.gov) and through the Consumer Financial Protection Bureau (CFPB), a U.S. government agency that ensures that banks, lenders, and other financial companies treat you fairly.
If it sounds too good to be true, then it probably is.