NFCC is Warning Against Foreclosure Scam Artists

The very high and rising default and foreclosure rate has introduced to the marketplace fraudulent companies and individuals trying to cash on homeowner fears of foreclosure, the National Foundation for Credit Counseling here said.

Since avoiding foreclosure serves best borrowers, lenders and the mortgage market at large, NFCC warns lenders and servicers, as well as their customers, to exercise caution and rely on financial education as a proven way in preventing abuse by con artists.

According to NFCC, rising foreclosure rates "have led to a growing number of scam artists offering to 'rescue' homeowners in financial distress" using various scams.

"Scam artists can evict a family from their own home and then sell it on the open market before the homeowner has any idea of what is going on," said NFCC spokesperson Gail Cunningham.

These self-proclaimed rescuers initially advise homeowners to cut access to legitimate financial solutions often telling unsuspecting homeowners to stop all contact with lenders, credit counselors or lawyers and let the "rescuer" handle all the details, NFCC said.

Foreclosure rescue scams usually are based on heavily promoted deals that target owners who have fallen behind on their mortgage payments, promising to save one's home or pay the mortgage. In fact, NFCC said, such deals only generate "a quick profit for the scam artist or strip away the value of the home with no benefit to the owner," which is why lenders and servicers also need help informing their clients on how a foreclosure rescue scam works.

After identifying distressed homeowners through public foreclosure notices in the media or at government offices, scam artists contact homeowners by phone, personal visits, cards, flyers, or advertising, telling homeowners they can stay in their house, keep their credit rating or receive instant cash. Usually they try "to make a quick profit through fees or direct mortgage payments that are never passed on to the lender," NFCC said, even "assuming ownership of the property by deceiving the homeowner." Plus, the owner loses the home to foreclosure after it has been drained of equity through fees and charges.

"Red flags to keep in mind," NFCC said, are homeowners need to "proceed with extreme caution" if an individual or company introduces itself as a "mortgage consultant" or "foreclosure service" that contacts owners of homes listed for foreclosure using flyers or soliciting for business door-to-door, by phone or e-mail; encourages owners to lease their home so they can buy it back over time; collects a fee before providing any services; instructs owners to stop all contact with their lender, credit or housing counselors, lawyers or other legitimate experts; and asks that mortgage payments are made directly to this person or his company, not the lender.

Some require that homeowners transfer the property deed or title to the "rescuer" and promise instant cash with "no strings attached," and ask owners to move out of the house for some period of time for remodeling or other reasons, or offer to buy the house for cash at a fixed, arbitrary price.

NFCC advises homeowners to never sign a contract before reviewing all documents, preferably with a lawyer who is representing only the owner's interest, and in the presence of a translator if need be. Also never send or give mortgage payments to someone other than the lender, never rely on verbal agreements and keep copies of all documents. Other dangerous claims are promises to save one's credit rating, or that a buyer will be found within days, or help in filing for bankruptcy to "stop the foreclosure."

The HousingHelpNow.org site provided by NFCC is an effective foreclosure resource information tool consumers can use to educate themselves about scams and other housing related issues, including the foreclosure risk test through the Mortgage Reality Check, or if necessary, information on how to connect with a certified housing counselor.

"Early intervention by a trained counselor can mean the difference between foreclosure and remaining in the home," Ms. Cunningham said. "The NFCC represents the largest network of certified housing counselors in the nation, with most member agencies being HUD-approved, and can provide solid direction for the homeowner."

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