Foreclosure Rescue Scams

The rate of homeowners in default on their mortgages or facing foreclosure is at an all-time high.  Many of the homeowners facing foreclosure are particularly susceptible to scam artists’ tactics.

Capitalizing on the current economic downturn and housing crisis, “foreclosure rescue” companies often scour foreclosure notices and filings and prey on consumers desperate to save their homes from being foreclosed. Their solicitations may be in person, by mail, telephone or e-mail, or via advertisements including TV and radio commercials.  These companies may claim they can assist you with obtaining a “loan modification” from your lender that will modify your existing mortgage to make it more affordable.  Other companies or individuals may offer to arrange a “lease-back” or “repurchase” of your home, claiming they will pay your mortgage and rent your home back to you.

Many loan modification companies violate Hawaii state law and charge customers thousands of dollars in up front fees, promising that they will negotiate with the consumers’ banks to lower their mortgage interest rates, lock in fixed rates, get late fees and past due payments forgiven, and even reduce principal balance.  Many of these companies lure consumers through false and misleading tactics, such as using company names and advertisements that give the false impression that they are affiliated with a government agency, falsely claiming to have extraordinarily high success rates – of as much as 100 percent, and falsely claiming to have a special relationship with the homeowner’s lender.  In some cases, the “modifications” they obtain actually require consumers to make higher monthly payments, a result that may be of little help to consumers already struggling to afford their mortgage payments and stay in their homes.

Companies involved in “lease-back” or “repurchase” schemes often require you to sign over the deed to your home with the option to buy it back later.   However, the terms of such transactions are so complex or fraudulent that homeowners are rarely, if ever, able to repurchase their homes. Sometimes the property is sold to another party without the homeowner’s knowledge.

Avoid scams. Beware of the following:

  • Anyone who offers to arrange to stop or delay foreclosure for an upfront fee.
  • Anyone who offers to pay your mortgage or save your home if you transfer the deed to your home.
  • Anyone who offers to make your mortgage payments for you.
  • Anyone who advises you to stop making your mortgage payments or to ignore calls from your lender or mortgage servicer.
  • Direct solicitations sent via mail, e-mail, or telephone or in-person solicitations at your home.
  • For-profit companies with names suggesting a government affiliation or who claim to be approved by the government.
  • For-profit companies that claim they have a relationship with attorneys but do not provide legal services.

For free help dealing with foreclosure you should set up a meeting with a non-profit consumer credit counseling service or housing counselor to help you deal with your lender without charge.