Foreclosure Fraud
Don’t Give Away Your Home

You wouldn’t hand over the keys to your home to a stranger. In just the same way, homeowners shouldn’t be careless when they choose someone to help them with their mortgage problems. This is particularly true for people who are having trouble making home loan payments or are facing foreclosure.

Some scams that appear to rescue people from foreclosure actually aim to victimize those in financial trouble. The fraud artists behind these schemes advertise over the Internet and in publications, distribute fliers and contact people whose homes are listed in foreclosure records. In some cases, they make their pitches to specific religious or ethnic groups.

This pamphlet is to alert consumers to the warning signs of mortgage fraud and spell out the steps homeowners should take to report such scams and to find trustworthy help.

Reporting these fraud artists is the first step victims can take to make sure that these criminals are brought to justice.

What Is Foreclosure Fraud?

Foreclosure fraud is like robbery without a gun. These fraud artists try to persuade you that they are helping you stay in your home at a time when you are most desperate. But in reality, they may be snatching your home and the value, known as equity, which has built up while you have lived there. These con artists are watching foreclosure listings in your area, hoping to take your money and your home.

Foreclosure Rescue Schemes

Rent-to-Buy Scams

You’re persuaded by a so-called “mortgage consultant” to sign over the title to your home under a deal that allows you to stay in the home as a renter and have a chance to buy back your home when you have more money on hand. Often the scam artist doesn’t pay the mortgage and your house gets foreclosed anyway. Other such “deals” are so expensive that it is nearly impossible to get your home back. 

Sham Counseling

You are persuaded by a so-called “mortgage adviser” or other person that he or she can negotiate a deal with your lender if you pay a flat fee first. You are advised not to contact the lender or a credit counselor but let the advisor handle the details. But your lender is never contacted. After you pay the fee, the con artist is gone, and so is your money.  

Bait and Switch

A swindler persuades you to sign “some papers,” often represented as new loan documents to settle your mortgage debt. But actually, you have signed over the title to your house to a crook. 

Bankruptcy Foreclosure

A so-called “loan consultant” promises to help renegotiate your debt with your lender if you pay a fee. But instead, the fraudster walks off with your fee and files for bankruptcy in your name. In some instances, the bankruptcy filing is made without your knowledge. 

Beware of: 

• Deceptive mortgages. When you see advertising for mortgages offering “Low Fixed Rates” or “Very Low Rates,” check the fine print carefully. Sometimes the attractive interest rate is an “introductory rate” that lasts only 30 days and then skyrockets. Also, check to see if the advertised “low rate” is a payment amount or an interest rate. If the payment amount is less than the interest each month, then the amount you owe will go up (called “negative amortization”). Deceptive mortgage ads also often leave out important facts like the Annual Percentage Rate (APR.
• Requests for the deed to your house for any reason, whether it is to take care of your credit or obtain new financing. The deed is the “key” to your home; don’t sign it over without professional advice.
• Offers to rent your house to you until your finances rebound.
• Lenders who entice you to borrow more than you need for the value of your home.
• Anyone who encourages you to sign forms that contain blank spaces that will be filled in later. Don’t sign those documents and stop doing business with this person.
• Someone who tells you that “stretching the truth” is OK or encourages you to falsify information and tells you “it’s done all the time.” It is not OK. It is illegal, and you could be prosecuted.
• Being rushed. A lender or “consultant” who rushes you, doesn’t answer all of your questions or doesn’t give you ample time to review documents is not helping you. If possible, avoid having document-signing meetings at night. If you feel pressured or uncomfortable, get a new lender.
• A company that contacts you first. Some are legitimate but many may be looking for a target. Always select a company with the advice of trusted family members or friends.
• Something that sounds too good to be true. It probably is.

Where to Find Help 

Los Angeles County Department of Consumer Affairs, Real Estate Fraud & Information Program (800) 973-3370 (Los Angeles and adjacent counties).

California Department of Real Estate (916) 227-0864, or go online to www.dre.ca.gov.

To find a HUD-approved housing counselor: Call (888) 995-4673 or go online to www.HUD.gov.

Better Business Bureau of the Southland, Inc. (909) 825-7280.

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Site updated: 14 Sep 2009