A borrower desperate for a way out of his/her financial troubles is especially vulnerable to the opportunities that offer quick, painless, and sometimes even profitable solutions to past-due bills. When those missed payments involve a mortgage and put the homeowner in danger of facing foreclosure, they can appear to be heaven sent. Beware. Great opportunities to avoid foreclosure rarely are what they seem and, worse, the proposed relief has a way of turning into the mortgagor’s worst nightmare.

In the past, we called experts in perpetuating fraud “con artists” or “con men.” Now we call these slick operators “scammers.” They still sweet talk their way into our living rooms, engage us in conversations that trick us into divulging personal information, and then get the most vulnerable among us to sign away our futures. Being aware of the depth and breadth of foreclosure and mortgage scams can help us protect ourselves from these individuals who are nothing short of being criminals.

There are several ways that scammers come into contact with their victims. In a slow moving housing market, potential victims are enticed to call the scammer through advertisements on street corners or in newspapers with offers that say, “Cash for your house” or, “We buy houses!” These people operate by getting their victims to sign over a deed without including any legal release from the current mortgage in the process. The victims then find themselves being evicted but still having responsibility for the mortgage contract.

Some scammers are bold enough to go door-to-door, chatting with whoever answers the door, cleverly collecting bits of personal information about the homeowner or neighbors. That information is then used to develop a false sense of trust in the perpetrator, who will then very generously offer to rescue or assist the homeowner out of a financial predicament. Sadly, the homeowners willingly sign off a deed, often believing that they will be able to rent the home until they can afford to buy it back. They don’t even know that they have just given away their home until it is too late.

The most difficult to detect scammers are those who perpetuate fraud within the walls of financial institutions with trustworthy reputations. Because these people are paid to sell home equity loans, they will tell their victims how to fill out applications to be assured of qualifying for the loan, looking the other way when asset reporting is inaccurate. In reality, the victim who doesn’t have the income stated becomes a party to fraud and, of course, doesn’t have the assets to repay the loan. These loans, called Home Equity Line of Credit (HELOC), are secured against the property, which soon goes into foreclosure.

Knowledge is the consumer’s best friend in avoiding becoming a victim to mortgage or foreclosure scams that can’t do anything else but end up badly. Being savvy about whom to trust, spotting danger signs, and knowing where the legal boundaries are is the best protection.

Know whom you are dealing with.

  • Don’t be afraid to face your financial problems If you are about to or have already fallen behind in your mortgage payments, always contact your lender yourself. Letting someone else do it for you puts you in a situation of divulging personal information and you won’t know how that information may be used later.
  • Be suspicious if anyone contacts you (rather than you contacting him/her) to offer any kind of foreclosure services, or claims to be a mortgage or foreclosure consultant. Do not sign anything until you have checked it out with a trusted friend or advisor.
  • Professional looking brochures and legal documents are easy for anyone to create, even criminals. Just because the paperwork appears legitimate doesn’t make it so. Check the company or individual out with your lender or with the Better Business Bureau at www.bbb.org.
  • Do not give out personal information to anyone who calls you or appears at your doorstep even if he/she insists the information is necessary to help you. Your lender already has your information on file; anyone else asking for it is likely to be pursuing his/her own interests, not yours. This is the adult equivalent of children talking to strangers on the street and has a high likelihood of ending in financial disaster and/or identity theft.
  • In situations where the borrower doesn’t speak English well enough to understand the technical language of a legal transaction, never use a translator provided by the person or company conducting the business; these translators are known to conveniently omit or misrepresent important information. Seek out the services of an independent, professional translator. Also, never use a child to translate legal or financial matters, as they will not fully comprehend the business level discussions and may translate inaccurately.

Recognize the signs of possible fraud.

  • If an offer appears to erase all your troubles, be skeptical. Legitimate solutions to foreclosure are rarely quick or painless.
  • Consulting an attorney or a trusted friend is the only way to be certain that an attractive offer of help is truly in your best interest. Many areas have free or low cost legal clinics that you can call for advice. If a proposed offer can’t wait long enough for you to visit with a professional advisor, then it is almost certainly fraudulent.
  • Many cases of mortgage foreclosure fraud will seek to separate the borrower from a relationship with the lender. Always make payments directly to the lender as has been done in the past and call the mortgage company yourself if there is a question about where a payment should be sent. Some scammers say they can beat the system by juggling payments, but the only thing they do is not make the payments at all and the victim doesn’t know it until it is too late.
  • Legitimate refinancing offers are never “pre-approved.” If you are solicited with this kind of offer, you should react with suspicion. Do not be afraid to seek outside help to determine if an offer is really in your best interest.
  • Never sign a contract with blank spaces or signature lines. Information can be added later, without your consent or knowledge, and may change the nature of the agreement. Also, if you have been asked to “skip” a section of a contract that has a signature line, it may contain information the person you are doing business with doesn’t want you to know about. Treat the transaction as you would with anyone trying to hide something important from you.
  • If you have been asked to fill in a financial application (even if it is with your own bank) and the person you are dealing with suggests that you can exaggerate amounts or otherwise falsify information, it is likely that you are being victimized as a party to fraud. Excuse yourself from the situation and take the paperwork to an attorney or trusted friend for advice before continuing with the application.
  • Be aware of current scams circulating in your area. Listen or look for words like mortgage or foreclosure scam or fraud, equity skimming, or predatory lending schemes. Newspapers and television news sometimes run narratives about such activities, and a quick search on the Internet reveals thousands of enlightening articles.
  • Finally, if the word “rescue” is used anywhere in the pitch to entice you to solve your financial problems, you are undoubtedly being invited to be a victim. Remember that there are no painless roadways out of debt.

Just like any other criminal activity, suspected fraud or scams should be reported.

  • Immediately contact your current mortgage lender if you think someone is attempting to draw you into a fraudulent transaction regarding your established mortgage. The number to call is located on your mortgage contract.
  • The FBI handles financial fraud investigations, including home equity line of credit and equity skimming. If you believe you have been approached by a scammer, you can fill out an FBI tip sheet at https://tips.fbi.gov/
  • Using the Better Business Bureau web site, you can check for complaints against any business or private contractor, or you can file a complaint of your own.
  • To locate the telephone number or web site to file a complaint with your own state attorney general’s office, go online to http://www.consumerfraudreporting.org/stateattorneygenerallist.php or check the government pages of your telephone directory.

Many a victim has made his/her troubles worse by being too embarrassed to admit a mistake that has led to disaster. However, mortgage and foreclosure frauds are not the types of problems that go away by hiding them. Calling and talking to the mortgage provider or to an agency with resources to assist victims is the only way to deal effectively with mortgage crime and possibly prevent foreclosure. It also may help others from becoming victims, too.