Beware of Foreclosure Rescue Scams

The unfortunate financial environment that much of the state of California is facing with regards to foreclosures has been a breeding ground for scam artists and less than legitimate foreclosure rescue companies. The stress and desperation of homeowners who are dealing with foreclosure makes it easy for fraudsters to claim to be able to help. It is strongly recommended that you research any business with the California Department of Real Estate or the State Bar of California before engaging them to help you prevent a foreclosure. You can also search for a foreclosure attorney through a legitimate attorney referral service.

The following are a few of the most prevalent scenarios in which fraud may be perpetrated.

How to Spot a Foreclosure Scam

Fraudulent foreclosure rescue firms use a variety of tactics to target distressed homeowners, from sending letters to more general approaches such as posting ads in newspapers or posters around town. It is often difficult to weed out these firms because they use the same marketing messages as legitimate companies. Once you are on the phone with them, their legitimate sounding promises offering relief sound like the magic pill you’ve been waiting for.

The first indication that you may be dealing with a scammer is that you are required to pay a hefty up-front fee, in the range of a thousand or several thousand dollars. This is sometimes compounded by their insistence that you pay your mortgage payments to them while they negotiate with the lender, but in reality keeping all the money before disappearing.

A second tactic is having the scam artist present you with a rescue loan or some other sort of rescue option where you are required to sign documents transferring the title of your house to them. As a common precaution with any documents that you sign, read the print carefully and don’t sign anything that you do not feel comfortable with. There are several schemes were the homeowner is asked to transfer the title, legally giving up ownership of the property. This type of scam can easily lend itself to a bait and switch type scenario, where certain promises are made upfront but never met after the scam artist has legal title to your home.

Another technique involves the illegitimate foreclosure rescue company filing bankruptcy for the homeowner, sometimes without their knowledge, which places a temporary freeze on the foreclosure but without any intention of following through with the bankruptcy proceedings. Bankruptcy is a very involved process that requires legal advice and can become very expensive. In most cases, bankruptcy is not the best option to prevent foreclosure, and in these cases where it is initiated by a scam artist it will most definitely end with devastating results.

How to Avoid Untrustworthy Companies

If you are having challenges or anticipate having trouble with your mortgage payments, contact your lender immediately. Alternatively, you can have a counselor work on your behalf to negotiate a loan modification plan which would offer legitimate long-term relief. Be cautious of unsolicited offers to help by mail or phone, and properly research any company before committing to their foreclosure prevention assistance.

Report Fraud

If you think you’ve been a victim of foreclosure fraud, contact the Federal Trade Commission or the California State Attorney General.

Understanding the Foreclosure Process in California

The foreclosure process in California is outlined below. It is important to be familiar with the process to help to determine your course of action. You can then avoid surprises and plan effectively.

Foreclosure generally takes anywhere from three months to one year depending on various factors and follows this typical course:

1. Pre-foreclosure: Late payment notices arrive in the mail and the lender/bank attempts to contact the homeowner by phone.
2. Foreclosure Notice: The lender produces an official foreclosure notice which can be published in a local newspaper and posted at or near the home.
3. Reinstatement Period: The time period before the auction or sale where a homeowner is able catch up on missed payments and any accrued penalties or fees.
4. Sale or Auction: The home is sold at auction to an investor or the lender assumes ownership.
5. Redemption Period: (Not available in all states) A final opportunity for a homeowner to buy back their property after the auction or sale by paying what the home sold for plus interest and any qualified expenses.
6. Eviction: The homeowner must move out. If the homeowner refuses, a local authority forcibly removes the residents and their belongings from the property.

Once a homeowner understands the process, choosing the right option to avoid foreclosure becomes easier. You can determine whether it is something that you can do on your own or whether you need help from a foreclosure attorney.

How to Prepare the Fight Against Foreclosure

Generally, the first step to take to avoid a foreclosure is to contact your lender. This might strike fear or feelings of embarrassment in many of you, but you should understand that without making contact and keeping an open line of communication you are effectively kicking yourself out of your own home. Before we place that call though, we must first cover some preliminary details.

How to Prepare

Educate Yourself on Foreclosures: Become educated on foreclosures so that you understand what you are facing. This should bring to light the options that are available and will help alleviate your stress by learning what can and will not happen when you are dealing with a foreclosure. Familiarity with the topic of foreclosure will also help you avoid foreclosure scams and other costly mistakes.
Learn the Timeline: Homeowners facing foreclosure should be aware of the typical foreclosure time line in the state of California. Familiarize yourself with the general timeline showing some major milestones in the foreclosure process along with other important characteristics for foreclosures in California: http://preventingforeclosure.org/help-stop-foreclosure/california-foreclosure-basics/
Learn the Process: Understanding the foreclosure process, including where you stand in the process, will affect the best option to avoid or prevent a foreclosure.
Keep Your Finger on the Pulse: Stay abreast of the market conditions for real estate in your area. Know how severe the rate of foreclosures are in your local area of California since this will affect your options. For example, if there is a flood of foreclosures in your neighborhood, putting your home up for sale, one of the options to avoiding foreclosure, may not be the best idea. An abundance of unsold inventory (homes) would push down the value of homes, increasing the amount of time required to sell.