Foreclosure scams offer fraudulent means to bail out homeowners from foreclosure, promising to save credit or allow them to stay in their home. Scammers may pose as lawyers or consultants, and any upfront payment should be viewed with suspicion. Homeowners should be cautious of deals that seem too good to be true.
When an individual is in danger of losing their home due to non-payment of a mortgage or taxes, they may fall victim to a foreclosure scam. These scams usually offer to bail out the homeowner from foreclosure through one of a number of fraudulent means. The two main types of foreclosure scams promise to either save a homeowner’s credit or allow them to stay in their home. Some dishonest people may even pretend to be lawyers or promise non-existent legal services. Dealing with the possibility of a foreclosure can be very stressful, but any deal that seems too good to be true could actually be a scam.
One type of foreclosure scam promises to save the homeowner’s credit. Defaulting on a loan can be very damaging to your credit rating, so some dishonest people or organizations will offer to absorb that damage if a homeowner signs their title. This risky action can actually cause the homeowner to lose ownership of their home, but still retain financial responsibility. A variant of this foreclosure scam may offer the homeowner a small amount of money to sign title to him, although it may involve the same sort of risks.
Another type of foreclosure scam is sometimes referred to as rent to own. This type of scam usually involves an offer to allow the homeowner to stay in his home and pay rent if he signs the deed. There may be a promise that someone with better credit will take out a new loan on the property and that the original homeowner will be able to buy it back later. In practice, the con artist may accept rent payments but ultimately leave the homeowner liable for his unpaid mortgage.
Other scam artists may pose as consultants, auditors or lawyers. Any unsolicited offer of consulting or auditing services regarding an impending foreclosure should generally be viewed with suspicion, especially if an upfront payment is required. In the United States, this type of business is highly regulated. Legitimate providers of these services are not allowed to charge upfront unless the homeowner agrees. If someone who offers a mortgage or foreclosure assistance requires you to pay upfront, you could be breaking the law.
Lawyers are a notable exception, as they are typically allowed to charge a down payment if they comply with regulations. Under US law, an attorney who assists with mortgage relief or loan modifications can ask for a down payment if you place it in a trust account. The lawyer can then draw on this account, but only when providing concrete legal services and informing his client.
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