Scams Target Homeowners Facing Foreclosure

by Francine Huff
October 18th, 2008

Foreclosure filings rose 27% in August from a year earlier, according to RealtyTrac. The frequent reports about Americans losing their homes have made many homeowners desperate to find a way to avoid becoming another foreclosure statistic. Knowing that some people will do anything to keep their home has resulted in a variety of mortgage scams. Here are three types of mortgage fraud that Scambusters says have picked up steam around the country.

1. Equity stripping occurs when a con artist tricks a homeowner into giving them title to their home. Why would a homeowner do this? Because they’ve been told they can stay in their home as a renter then buy back the house after all of their financial issues have been resolved. The scammer takes out any equity left in the home and in the end the homeowner can’t afford to buy back the house.

2. In some cases fraudsters present themselves as someone who will help a homeowner by negotiating with their lenders. If you fall for this scheme you’ll be charged a lot of high fees for supposed efforts to contact lenders. Generally, your “rescuer” will also advise you not to answer any notices or phone calls from your creditors. Most people don’t realize they’ve been scammed until they’re in a deeper financial mess than before.

3. Bait and switch tactics focus on getting you to sign documents that give ownership of your home to scammers. They claim to be housing counselors who will help you obtain a new loan to fix all your financial woes. Of course the homeowner ends up signing away title to their property.

If you’re among the many Americans struggling to keep your home, avoid trusting strangers who offer to help you. If a stranger calls you on the phone or knocks on your door offering a deal, decline their help. If you do seek assistance from a legitimate organization to save your home, don’t sign any documents until you have an attorney review them.

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