Epidemic of loan restructure and fake refinance scams for mortgage holders

In the list of top 10 scams for 2007, Foreclosure rescue scams came in at number 7.

As if people who fell behind on mortgage payments didn’t have enough troubles, an increasing number became victims of foreclosure rescue frauds. In the list of top 10 scams for 2007, Foreclosure rescue scams came in at #7.

According to real estate experts, the scams take different forms:

Owners unknowingly sign over properties. The property owner is led to understand that they will be able to rent the property until they are able to secure financing. The perpetrator of the scam gets control of the property usually with the help of a straw buyer to secure a new mortgage for the current appraised value. The scam artist pockets the stripped equity and does not make payments on the new loan. When the property is foreclosed on the straw buyer, the original owner is evicted. Even after month of paying rent to the scam artist.

Loan restructure “experts” collect fees and do nothing. Many times owners with delinquent mortgages are approached with a “for fee” deal. They are assured that if they pay the company or person approaching them up front, that they will be able to negotiate a better deal with the mortgage company than the homeowner can on their own. The homeowner is instructed to not contact the mortgage lender directly, but to let the negotiator handle the transaction to get the loan restructured. The fees are pocketed with no negotiations taking place on behalf of the homeowner. Neither the homeowner nor the mortgage company are aware the third party (mortgage rescue negotiator) is doing NOTHING except taking the money and skipping, providing zero service for the fees.

Fake refinance brokers inflate property values for personal gain. People have been approached to refinance with loans that require prepayment of fees for the application. The fee is a percentage based on the total of the new mortgage loan. Many people are paying thousands of dollars to fill out an application when there is no guarantee of getting a loan approved and funded, or that the fake broker will even file the application. The fake broker pockets the fees, no application is submitted or loan products offered have more onerous terms and higher payments than the one the homeowner is trying to refinance.

Foreclosure notices are publicly recorded and published in local newspapers. Scammers approach homeowners directly at their doorstep or call them on the telephone. The scammers’ modes of operation are little different than a burglar planning a home invasion based on publications of funeral notices. Homeowners are targeted when they are most vulnerable, in the place they feel most secure, at the time they are most desperate and easily confused..

In some cases, the scams resulted in homeowners losing whatever equity they did have. Or they lost a home that might have been saved with a legitimate refinancing. If you are approached directly in either by someone offering any of these solutions, contact your local advocate. Report the situation and seek counseling.