It does not take an economist to know that times are tough. Unfortunately while most people are re-evaluating their budgets and spending, predators are lurking in the shadows ready to pounce on unsuspecting homeowners just trying to stay afloat. In these times of perceived financial uncertainty, it may be more important than ever to be vigilant as to whom you trust.
One banking watchdog organization reported that in many areas of the country, foreclosure rates rose as much as 30% between March 2008 and February 2009. Although some experts believe that many of these figures are over-estimated and inaccurate, the reports fuel the fear many have of losing their homes and suffering financial devastation. It is that very fear that scammers and con artists use to their advantage to exploit homeowners.
According to one recent news report, last year American homeowners were defrauded out of 5 billion dollars, up 1 billion from 2007. Pennsylvania ranked tenth in the number of states with the most fraud cases, totaling nearly $41 million dollars of loss in 2008.
Although there are many variations of fraud scams and schemes, here are the three most popular:
False Help - In this scam, the con artist promises to represent and rescue the homeowner from high bills and debt. Often charging very high fees, the predators claim to negotiate with lenders and creditors, often telling homeowners to ignore any communication from the banks or their agents.
In some of the reported cases, the con artist convinces the homeowner to make the mortgage payment directly to them and not to the lender. Believing that the credit details are “all worked out” and in the hands of a third party, the homeowners don’t know that they’ve been conned until it’s too late and the house is in foreclosure.
The Bailout - With many homeowners drowning in a sea of credit card and mortgage debt, they look for a way out at any cost. Recognizing and then preying on this desperation, with this scheme a scammer is able to convince or trick the homeowner into signing over the deed to the house. Then for a nominal fee, the con artist rents the residence back to the original homeowner who hopes to be able to reclaim their home in better economic days.
Unfortunately, when all is said and done, the con artist has bled the house of most or all of its equity and the original homeowner can’t afford to buy it back.
Bait and Switch - In this scheme, thieves pose as legitimate mortgage counselors and lure clients with promises of low rates and the professional service of guiding them through the mazes of the bank paperwork. With the hopes that these “counselors” are the answer to their money problems, the victims sign mountains of forms that are false or forged. Some of the documentation includes “grant deeds” that enable the thieves to pass the property to a third party ultimately victimizing the client by leaving them with a monthly mortgage but without a house to live in. Many of the popular targets of this swindle are the elderly or foreign buyers.
Times are tough but don’t make them any harder by ignoring these few simple rules:
1.) Whether it’s a contractor or a so-called “financial expert”, either completely avoid or thoroughly check the credentials of anyone who approaches you for your business.
2.) When dealing with a third party is any business circumstance, never sign over complete control of your finances to a stranger or outside service. Legitimate mortgage brokers or financial service companies will never ask you for control of your bank account.
3.) Communicate with your lender, bank and creditors. Speak with them directly and with or without a hired mediator. Know what your responsibilities are and get all agreements in writing.
4.) If you do feel the need for a counseling agency, make sure that they are not only licensed by the state, but certified by the Department of Housing and Urban Development (HUD).
5.) Don’t sign anything that you do not understand or agree to. Mortgage issues can be a very slippery legal slope so never hesitate to contact an attorney. Your local county bar association can help.
Get out of debt schemes are just like get rich quick schemes. Remember the rule: If it is too good to be true, than it probably is.