Foreclosure Scams

Facing the threat of losing a home, a home owner will be plagued by individuals and companies offering to "help" the person out of his or her difficult financial situation.  In most cases, these people are out for one thing--making money from someone's problems.  These scams will come in many shapes and varieties...ranging from direct mail offering to "negotiate" on behalf of the home owner for a nominal fee to people knocking on the door offering to help out by reinstating the loan, taking title and leasing the home back to the individual.  People facing foreclosure are vulnerable to con-artists and scams.  However, using a little common sense any home owner can avoid being taken advantage of and find a viable and ethical solution for his or her dilemma.

In Arizona, a lender initiates the foreclosure process by filing a Notice of Trustee Sale with the county recorder.  This notice is the equivalent of posting a large 50 foot neon sign above someone's house saying, "Here I am, take advantage of me!" because shrewd individuals and companies know that the home owner is in trouble and will often times do anything to resolve the problem.

The following lists several ploys implemented by these individuals:

Short Term Loans.  People may approach financially troubled home owners with the possibility of lending him or her a short term loan, and in some cases offer a loan with no payments for a certain period of time. These loans have high interest rates, require a balloon payments (where the home owner must pay off the loan by a certain date), or other features that may sound attractive. In reality, these loans are additional liens against a home and if the home owner fails to make a monthly payment or the balloon payment, the home owner could face foreclosure again.

Unethical Realtors Trying to Take Your Equity.  Real estate agents (many claiming to be "pre-foreclosure" specialists) offer reinstate a person's loan and sell the house with the idea of salvaging any accrued equity and appreciation in the home. The catch is that the home owner must split the earnings with the agent instead of paying a commission. The reality is that the home owner could have hired a competent agent and accomplished the same end result with less money out of pocket.

Investors Trying to Take Your Equity.  Many Investors aka the I/We Buy Houses people approach home owners facing foreclosure and try to take their home and equity without offering any other assistance. An ethical person would not simply just take your equity without trying to exhaust every effort to help you save your home and equity. These unethical people have no other answers for you other than taking your home and are just trying to make money offer your problems.

Foreclosure Consulting Agencies.  Many investors set up mask companies to make themselves look like a foreclosure assistance company. These investors and companies only have their own interest in mind and are trying to make profits off of homeowners. They are either after homeowners equity, deed or to get them to sign a purchase agreement that they can assign to someone else for a profit. These guys are easy to identify by simply asking them if doing business with them is going to involve you having to sign a purchase agreement with them or deed them your home. If they say yes or say no and later try to convince you to deed them your home or sign a purchase agreement with their company, you should run away as fast as you can. Were not trying to imply signing a purchase agreement is necessarily bad but we are saying having to sign a purchase agreement with a company or owner of the company after he claimed he was a consultant/counselor is a little suspicious.

Debt Negotiating.  Companies, reputable and not-so-reputable, offer to negotiate or consolidate the debt for the home owner. The catch is that the home owner must prepay for these services. These individuals do not offer anything that other non-profit agencies will provide free of charge. If you need a debt negotiating agency, contact your local Consumer Credit Counselors.

“Financial Services” Companies.  There has been a proliferation of individuals, often posing as a financial services company, that offer to assist home owners facing foreclosure with everything from tax advising, debt management, real estate sales and pre-foreclosure sales. The reality of these individuals is that they do not run legitimate corporations (according the Arizona Corporations Commission) and are not legally licensed as required by the Arizona State Banking Department for debt or credit counseling. Be wary of anyone who wears a thousand hats for any occasion or pay money for their services upfront!

Visitors.  Expect many people, including investors and real estate agents, to visit your home. They will paper your house with flyers, knock on your door at all hours, and stalk you and your family until they have an opportunity to speak with you. The worse perpetrators are individuals posing as government employees dispatched to your home to assist you. The lender, the County, and the Federal government will not send out personal representatives to assist you unless you have initiated the call to the right agency.

Bankruptcy.  No matter what an attorney may tell you, bankruptcy does not stop foreclosure.  It is true that bankruptcy does suspend the foreclosure process.  For more information on foreclosure and bankruptcy, click here.

There is free help and assistance for home owners facing the possibility of foreclosure.  If you would like to talk with someone about your situation, click here.