Daily Real Estate News | June 3, 2008
Most Common Mortgage Scams
Scam artists may promise to save cash-strapped home owners from foreclosure but then, instead, steal their money or any remaining home equity. Such scams are becoming more prevalent, and some states are fighting back.
In Florida, one of the nation's foreclosure capitals, State Attorney General Bill McCollum has filed suit against National Foreclosure Management, a mediation company, for allegedly defrauding troubled home owners. Fraudulent rescue companies in Illinois have been increasingly penalized, while in Massachusetts the for-profit practice of foreclosure rescue transactions has been banned.
Here are the most common ploys scammers use to prey on desperate home owners:
- Bait and switch. The home owner is presented with what appears to be an application for refinancing, but in reality it's title transfer papers. Once the home owner signs, he loses his home.
- Upfront fees. Scammers ask for money to be used for locating rescue funding. Once the home owner pays, the scam artist disappears.
- Bankruptcy ploys. An attorney – or someone who pretends to be – persuades the home owner that filing for bankruptcy will save the house. The only one who wins is the person who pockets the fees he charges to file.
- Rent-to-buy. Fraudsters offer to buy the property with a provision that the home owner will pay rent while building equity. Once the title is transferred, the former home owner is locked out.
- Fraudulent refinance deals. A scammer offers to use his higher credit score to secure a refinance deal, but first the home owner has to hand over title to the house.
Source: Forbes, Matt Woolsey (05/23/08)
