Foreclosure Scams and How to Protect Yourself



If you are in foreclosure or behind on your mortgage then you are vulnerable. Wherever there are vulnerable people you'll find predators. Few of these predators are doing anything illegal but what they are offering is usually not in your best interest.

We have listed some of the more common “solutions” offered people whose home is in foreclosure or are behind on their mortgage that you want to be wary of. Educate and arm yourself with knowledge in order to protect yourself and your family.

“Pay us and we will do an in depth evaluation to determine if we can get you a Loan Modification.”
This one really is a scam. A company capable of getting their client a loan modification will be willing to offer the basic service of evaluation at no charge. We believe that loan modification is probably the absolute best option for a homeowner who has fallen behind on their mortgage.

“We Will Save Your Credit.”
Their promise goes something like this: “Just pay us a “small” fee and sign the house over to our company. That way the foreclosure will be recorded against us and not you.”
The Truth: The foreclosure will be reported against the borrower on the note, which is you, not anyone else.

“Here is some money for your equity. Sign over your house to us and we will pay the default.”
Actually this CAN be a legitimate offer IF you cover the following details:

  • Know how much equity you are selling
  • Be certain the purchaser will actually make up the default
  • Be certain the purchaser will continue to make the payments
  • Be aware that you are still responsible for the loan
This is risky and you absolutely will need to read the fine print and understand every detail of the contract. We list this under “Scam” in our Foreclosure Information section since there are so many places for you to get the short end of the stick. If you can find another option, go with it instead.

“We will buy your home and then lease it to you. You always have the option to buy it back.”
This one, too, is not so much a scam as a raw deal for the homeowner. The reality is you will have to get a new loan to buy it back and will have to finance more than you owed when you sold it. You could wind up with higher interest than your previous loan along with higher payments. If you have a close relative or friend who is willing to contractually enter an agreement with terms that are beneficial for both of you then this may be a good option. Otherwise we suggest you keep looking.

“We can get you a new loan with no out of pocket expense and solve all your financial problems.”
Refinancing cost money. They are able to get you a loan with no out of pocket expense by rolling the fees into your loan. If you are not getting a better interest rate to offset the fees incurred you are just putting a band aid on a gapping wound. Loan officers make money loaning money so their main focus is selling loans, not assisting you with your finances.

“Since I'm a pre-foreclosure specialist I can find a buyer for your home at top dollar and quickly.”
Sounds good doesn't it? Are you really getting top dollar though? If you have exhausted your options and need to sell then selling pre-foreclosure is better than foreclosure. However be sure you know the value of your home. Get three local agents to do a Comparative Market Analysis and be cautious about who you work with.

Stop Foreclosure With Bankruptcy
This is an urban myth. Bankruptcy will not stop foreclosure. It can however postpone it allowing you to get your finances reorganized. You will need a reputable attorney to represent you during the bankruptcy proceedings and to give you pertinent advice. Take the necessary time to find a good attorney.