Facing foreclosure is bad enough, but fending off foreclosure scammers makes an already stressful situation even more so. Foreclosure presents the unfortunate opportunity (and believe us, many will take it) for companies to prey on a homeowner’s weakened financial stability. That’s why it’s important that borrowers be informed enough to avoid becoming victims of these ruthless practices.
Avoiding the Scams
Homeowners should always be weary of any “foreclosure consultants” who call during a time of financial distress. Upon receiving one of these calls, it’s essential to do some research before giving the company any information. Any borrower who wishes to utilize a company for foreclosure help, should look into its reputation through the U.S. Department of Housing and Urban Development website, as well as other online trusted sources. However, the best defense in avoiding scams is simply being educated about the popular methods fraudulent companies use to fool borrowers. Here are some of the most common methods scam artists employ.
- Equity Skimming. This method of scamming a homeowner involves a “buyer” offering to purchase the home and pay off the remainder of the mortgage. This scammer will even go as far as to have the borrower transfer the deed of the home to him. Once the deed is secured, he may take out all of the home’s equity and skip town without paying off the mortgage. In other scenarios, he will rent out the home, while making no effort to pay off the loan. And here’s the kicker — in both situations, the previous homeowner still has the obligation to repay. Transferring the deed does not transfer the debt, so when the lender forecloses — it’s the original borrower who has to pay up.
- Balloon Payments. When a new lender approaches a borrower nearing foreclosure, with the promise of a refinanced loan with smaller installments, it’s important to read the fine print. Sometimes, these new loans include what’s called a balloon payment, which requires the borrower to pay the entire amount borrowed at the end of the repayment period. The reason the monthly payments are kept so low is because the borrower is only paying the interest. When the homeowner can’t make the final lump sum, the lender proceeds with foreclosure.
- Equity Stripping. With equity stripping, the scammer proposes a new loan. This new transaction requires bending the truth about the borrower’s income, and typically comes with payments he will be unable to make. When the borrower defaults, the lender quickly forecloses, and strips the home of its equity.
- Loan Flipping. This type of scam occurs when the lender continuously tempts the borrower with a large cash advance to persuade him to refinance the loan. In the end, the extra fees tacked on to the new loan typically far outweigh the money the homeowner gets upfront. This can lead the victim of the scam into a great deal of debt.
The best advice we can give is to seek out the help of an attorney before signing any agreements regarding your home or mortgage. Always beware of wolves in sheep’s clothing during times of financial distress. If you’re facing a potential foreclosure, call a Miami foreclosure attorney at Graham Legal today to learn about your options.