Last year (2020) will best be remembered as the year of “If it could’ve happened, it probably did.” The COVID-19 pandemic flipped our economy upside-down while millions of homeowners struggled to make their mortgage payments. Even worse was the fact that scammers saw this as an opportunity to take advantage of homeowners who were struggling financially by running “foreclosure rescue scams.”
Red Flags to Watch Out For
Often referring to themselves as foreclosure rescue companies, these scammers prey on distressed homeowners by searching the internet or through the local paper as well as through public findings. They typically send e-mails or letters that promise to help you avoid the foreclosure process. Look for headlines such as:
- “Get a Loan Modification”
- “Save Your Home from Creditors”
- “Stop Foreclosure Now”
Don Burns of H.O.M.E lending quoted “Some may even call you or text you while others may be bold enough to knock on your door and leave their (phony) business card or a flyer.”
The 3 Most common Foreclosure Rescue Scams
Foreclosure rescue scammers will use exaggeration, lies, and misinformation to try and pressure you into signing up for their services. The following are the 3 most common scams being perpetrated today. Although they vary somewhat, they all of the same end result – the scammer pockets your cash, you never see or hear from them again, and your financial situation doesn’t change (or possibly gets worse):
- Forensic audit scams – a so-called “auditor” will supposedly review your mortgage to determine whether or not your lender followed the law when you got your home loan. They’ll claim that there were violations during the process and that you can leverage a loan modification because of those violations. However, nothing will happen and you will have already paid their forensic audit fee.
- Housing counseling scams – scammers will attempt to make you pay for foreclosure information or housing counseling when you can find it online or obtain it from a HUD-approved counselor FREE of charge.
- Loan modification scams – a company representative claims that they can get your loan modified and, in some cases, tells you they’re affiliated with a legal network. Once they have your trust, they’ll try to pressure you into paying an exorbitant fee (possibly thousands) to get your loan modified.
Regulation O or the MARS (Mortgage Assistance Relief Services) rule protects the homeowner from foreclosure rescue scams. Some states have even passed laws that govern these companies. It is best to talk with experts to know more about red flags to watch out for.