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Fraud at Your Front Door

Friday, 23 Jan 2009 | 3:17 PM ET
Mortgage Foreclosure Scams
Carmen Wong Ulrich helps viewers avoid mortgage foreclosure scams.

Americans are losing their homes in record numbers. Last year, foreclosures in this country topped 3 million – up a staggering 225% in just two years. Now, scammers are knocking at the door, looking to make a quick dollar off the desperate. Known as ‘foreclosure rescue companies,’ these con artists prey on homeowners by offering to help get a lower rate on a mortgage in exchange for a fat fee. You fork over as much as $3000 but the company never delivers. In many cases, they don’t even attempt to contact your lender. So you don’t just lose you money – you lose the time to negotiate with your bank and, in the worst cases, you lose your home.

These types of rip-offs have been going on for some time, says Don Peebeles, founder of the multi-billion dollar real estate company Peebles Corp. Now they’re increasing as scammers hope to capitalize on all the people who got sucked into the housing bubble and took teaser rates on mortgages they couldn’t afford.

If you feel you are in danger of losing your home, you must be extra vigilant of these scammers, fraud attorney Jeff Sonn says. Watch out for people who come knocking on your door saying they can rescue you from foreclosure. They will ask you to sign a quick claim deed and then they go to the foreclosure sale to buy your home and then lease it back to you. The idea is that you can then catch up on your payments and buy the home back from the ‘rescuer’ but that is rarely the case. What they really do is sell the house and then take any money left over above the mortgage – so they have your equity and you are still on track to be evicted.

Sonn cannot stress enough the value of opening up a dialogue with your lender if you are worried about losing your home. More often than not, banks will be willing to work with you because they certainly don’t want non-performing loans on their books.

If the lender seems unwilling to relax the payments to help you, seek a qualified real estate attorney or non-profit credit counselor. You can find one at NFCC.org, HUD.gov or the Atlanta-based Consumer Credit Counseling Service.