Foreclosure Defense Scams

Foreclosure Defense Scams

Foreclosure defense scams turned into a widespread problem after foreclosure rates skyrocketed during the housing market crash. After a large number of homeowners experienced financial difficulty and began to face the harsh realities of foreclosure, a number of nefarious individuals began to prey on these distressed homeowners. Some unfortunate homeowners were scammed out of thousands of dollars and may have even lost their home because of these foreclosure defense scams.

Foreclosure defense scams can vary in the way in which they operate, but typically can occur when a company or individual makes promises to save a distressed homeowner’s home from foreclosure, but does not follow through on said promise. Some scammers might promise to get the homeowner a loan modification while others may convince the homeowner to transfer the deed of the home. In any case, homeowners are advised to educate themselves about the common types of scams in order to have the best opportunity at avoiding becoming a victim to these scams.

Types of Foreclosure Defense Scams

Foreclosure defense scams may appear in a variety of forms. Three common foreclosure scam types may include:

  • 1. Fraudulent Bankruptcy

A fraudulent bankruptcy may start by homeowners being required to pay a high upfront cost. In this scam, the homeowner is often lead to believe the scammer is attempting to negotiate with mortgage lenders for a mortgage refinance or modification. The truth is, the scammer might take the money and file a bankruptcy shortly after without the homeowner’s knowledge. Foreclosures can be temporarily prevented with foreclosure, but the homeowner can be stuck with many negative effects from bankruptcy they had not prepared themselves for.

    2. Rent to Own Scams

In this foreclosure defense scam, a company or individual may offer homeowners the chance to allow homeowners to stay in their homes as renters in order to prevent foreclosure. Scammers may convince homeowners to transfer the deed of the home, so the scammer can take care of the foreclosure and the homeowner stays as a renter. The truth is, these scammers often take the home and never allow homeowners the opportunity to get it back.

    3. Loan Modification Redirect or False Foreclosure Counseling

False foreclosure counseling typically involves scammers guaranteeing they can achieve a loan modification for distressed homeowners. There may be a high upfront cost or monthly fee. The scammer commonly says they are in ongoing negotiations with the mortgage lender while no actual work is being done at all. Alternatively, in a loan modification redirect the scammer may use a portion of the money to hire a real foreclosure defense company, but keeps a large portion of the homeowner’s money for themselves. In both cases, homeowners are often lead to believe their foreclosure will be stopped with a loan modification.