This is probably one of my most frequent topics on the blog. Every time there is media attention devoted to a new development in the mortgage foreclosure crisis, it seems prudent to restate this warning: beware of mortgage foreclosure scams.
With the rollout of HARP 2.0, the Independent Foreclosure Review, and the foreclosure fraud settlement, there is a greater opportunity for scammers to trick the unsuspecting home owner. In fact, the Homeownership Preservation Foundation has seen a 60% increase in reported mortgage rescue scams since the beginning of 2012.
Here are my tips for spotting a scam:
1. Watch out for "official" documents
One hallmark of mortgage rescue scams is correspondence that looks like an official government document. Ornate seals, poorly reproduced logos of agencies like HUD or FHA, and other decorations can trick people into thinking that a specific debt relief company is backed or approved by the federal government. When in doubt, contact the specific federal agency directly via contact information located on its website.
When federal programs and settlements are announced, scam artists tend to employ this tactic to catch the uninformed and unaware.
2. Don't pay up front for assistance
Unless you are hiring an attorney to file a bankruptcy, defend your foreclosure in court, or otherwise provide you legal services that are defined in a retainer agreeement, you should not pay up front for assistance. There are plenty of not-for-profit organizations that provide free assistance. For example, the DuPage Homeownership Center provides assistance to qualilfied borrowers free of charge.
3. If it sounds too good to be true, then it probably is.
Nobody can get you a free house. Massive principal reductions are very rare. The bigger the promise, the bigger the lie. There are very real solutions to a mortgage foreclosure, but they will vary based on the facts of the specific case. The "judge gave me a free house" cases are few and far between. Many are reversed on appeal. The best bet for any home owner is to seek assistance from an advocate that manages expectations and that seeks to provide predictable outcomes.
4. Shop around and avoid high-pressure sales tactics
So long as you seek help before your home is scheduled for a sheriff's sale, you most likely have more time than you think. Do not hire the first person or company that comes along. Take your time to speak with multiple service providers and choose the one that best fits your needs. Avoid people who try to pressure you into making a decision right away. A good advocate will want you to make an informed decision, not a decision based on fear.