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Be Alert to Mortgage Assistance Relief Scams

A few years ago, the mortgage industry was in the news on almost a daily basis. And most of the news reports were not very flattering. Millions of homeowners were facing foreclosure and to make matters even worse, the headlines were filled with stories about people who had lost their homes illegally. Many banks and mortgage companies were found to have deliberately "misplaced paperwork" and even to have credited payments to the wrong homeowner accounts.

At the same time as the foreclosure crisis was raging, Mortgage Relief Assistance scams were coming into focus as these shady businesses went after terrified homeowners with the promise of helping them stay in their homes and avoid or stop the foreclosure process altogether. Obviously, the thought of losing your home to foreclosure is a frightening prospect. But the reality is that scam artists are ready, willing, and (many times) able to prey on these financially strapped individuals when they are most vulnerable.

If you are currently struggling to make your mortgage payments or are facing foreclosure, the Federal Trade Commission (FTC) wants all consumers to know how to recognize a Mortgage Assistance Relief scam. The FTC has a rule which protects homeowners. The Mortgage Assistance Relief Services (MARS) rule states that it is illegal for companies to collect any fees until the homeowner has received an offer of relief from the specific mortgage lender and has accepted that offer.

In simple terms, this means that even if you agree to a Mortgage Relief company helping you, you don't have to pay until you get the desired result from your lender.

How Scam Artists Operate

Mortgage Relief scam artists employ many different tactics to entice distressed homeowners. Foreclosure notices are a matter of public record so many times these fraudsters sort through public foreclosure notices in newspapers, on the Internet, or through local county government offices. Once they have a list of names, they send personalized letters to the homeowners. Sometimes they use a broader approach and simply place ads on the Internet, on radio and television, or in newspapers. It can even be as simple as putting posters on telephone poles. Anything that gets the attention of strapped homeowners is considered "fair game" by these bogus businesspeople.

Mortgage Relief companies usually make various claims in their advertisements. Some are half-truths at best and out-and-out lies at worst. Here are some of the most common statements used to lure unsuspecting homeowners:
  • "We can get you a loan modification".
  • "Nine out of ten customers get positive results".
  • "Even if your home is scheduled to be sold, we can keep you in your home."
  • "We offer all customers a 100% Money Back Guarantee".
  • "We can stop your foreclosure immediately!"
  • "We work with banks to get you a speedy approval".

Once a scam artist has your attention, the number one goal is to get your money. The FTC urges consumers to learn about how these scams operate. By understanding and recognizing the tactics fraudsters use, you will hopefully be able to protect yourself from these shysters.

Common Mortgage Relief Scams

Any homeowner who is trying to avoid foreclosure is generally riding an emotional rollercoaster. Foreclosures don't happen in a vacuum. Most people dealing with a possible foreclosure are also experiencing other serious financial problems. Debt-laden homeowners are stressed and scared and often have no idea how to best deal with the situation facing them. But one thing is for sure... the thought of losing a home can be truly terrifying.

Unfortunately, these homeowners are particularly vulnerable to scam artists who are aggressively looking for people in exactly this financial situation. Government agencies such as the Federal Trade Commission and the Department of Housing and Urban Affairs (HUD) try their best to warn consumers about Mortgage Relief Scams so that homeowners will not be lured by false promises and claims.

The following scams are some of the most common. Be alert to them and avoid them at all costs!

  • Con Artists Who Pose As Official Counselors. Many times these fraudsters claim to be connected to the homeowner's actual mortgage lender. Sometimes they state that the homeowner has been approved for a loan modification but that he or she has to pay an upfront fee to receive it. These con artists even go so far as to use company names similar to those of legitimate government and non-profit agencies. They have even been known to use the same letterheads and logos of real government agencies.
  • Scammers Who Offer To Perform A Forensic Audit. Usually a "salesperson" will call a financially troubled homeowner and offer to perform an audit of the mortgage paperwork to find violations. They tell the homeowner that these violations can be used to force the mortgage company to approve a loan modification. Unbelievably, homeowners have been known to hand over an average of $3000 (upfront) for these so-called mortgage audits which are totally bogus.
  • Shady Businesspeople Who Offer Money-Back Guarantees. People hear "money-back guarantee" and immediately think that no matter what happens, they are protected from financial loss. WRONG! Many shysters promise homeowners a loan modification under the Home Affordable Mortgage Program (HAMP). They even advise the homeowners to stop paying their mortgage payments and to not speak with their lenders. Many times homeowners could have qualified for a loan modification if they had only spoken directly with their lenders. Unfortunately, once the mortgage payments and all communication stop, the homeowners are left with very little, if any, room to negotiate.
  • The Bait and Switch Tactic. Many con artists use this tactic on unsuspecting homeowners. The scammer gives a homeowner papers which are supposedly legal documents and must be signed to receive another loan. Supposedly, this additional loan will be used to make the delinquent mortgage loan current. Hidden in these papers is a document which states that the homeowner surrenders the title to the home to the scammers in exchange for a "rescue" loan.

Warning Signs of Mortgage Relief Scams

If you are currently trying to avoid foreclosure, walk away from any company which does the following:
  • Advises you not to speak with your lender, a certified financial counselor, or a lawyer.
  • States that nearly all of its customers receive loan modifications or some type of mortgage relief.
  • Insists on payment only by cashier's check or wire transfer.
  • Strongly suggests that you make your mortgage payments directly to the company, not your actual lender.
  • Tells you to transfer your title or property deed over to the company.
  • Demands an upfront fee before providing any services (unless it's a legitimate lawyer).
  • Pressures you to sign papers without giving you time to read and understand them thoroughly.

How to Report a Scam

If you think you have been the victim of a Mortgage Relief Assistance scam, get in touch with any one of the following agencies to report it.

You should also contact your mortgage lender immediately to see if the foreclosure process can be prevented or stopped.