Mortgage relief scams target homeowners with false promises to save homes from foreclosure. Warning signs include upfront fees, requests for deed transfers, and pressure tactics. Common scams include phony counseling, forensic audits, rent-to-buy ripoffs, equity-skimming, and bait-and-switch loan schemes. Protect yourself by staying in contact with your lender and avoiding anyone who asks for money upfront or deed transfers.
Here are some common warning signs of a mortgage relief scam:
Scammers will demand payment upfront, before you get any services. That’s illegal — and a warning sign to avoid them.
Scammers may want you to pay only by cashier’s check, wire transfer, or a mobile payment app. Scammers like you to pay this way because it’s hard to get your money back.
Scammers may try to convince you to transfer the deed to your home to them. The deed is the legal document that proves who owns the home. If you transfer the deed, you’re not likely to get it back.
Scammers come up with different stories to pressure you into paying them. Knowing some of their come-ons can help you avoid them.
Phony Counseling
Scammers say they are: housing counselors or lawyers — or that they represent a law firm or they’re from the government. The scammers say they’ll handle all the details of a deal with your lender to lower your mortgage payments or save your home from foreclosure. They’ll typically tell you not to contact your lender, lawyer, housing counselor, or credit counselor. They may tell you to make your mortgage payments directly to them — rather than to your lender — or to transfer your property deed to them.
The scammer takes your money and never makes payments to your lender, so your loan goes into default.
The scammer stops returning your calls and takes off with your money. If you hire someone who says they’re a lawyer, make sure they are licensed as a lawyer in your state and are reputable. Just because a lawyer works for the company doesn’t mean the company can charge you an upfront fee or that it’s legitimate.
Forensic Audits
Scammers say they are: mortgage loan “auditors,” or “foreclosure prevention auditors,” lawyers, or other experts. They’ll review your mortgage documents to see if your lender complied with the law. They say the audit can help you avoid foreclosure, speed the loan modification process, lower the amount you owe, or even cancel your loan.
Scammers can’t promise that a forensic loan audit will help you get a loan modification or any other mortgage relief.
Some federal laws do let you sue your lender based on errors in your loan documents. But even if you sue and win, your lender doesn’t have to modify your loan simply to make your payments more affordable or give you more time to repay the loan. If you cancel your loan, you’ll have to return the money you’ve borrowed so far, and you may lose your home.
Rent-to-Buy Ripoffs
Scammers say: “If you give us the deed to the home, we’ll get our own financing to save the home from foreclosure.” These scammers say you can stay there as a renter and your rent payments — supposedly — will go to helping you buy the home back from them later.
Transferring the deed does not transfer the mortgage, so you’ll still owe payments on your mortgage loan. Once the scammers have the deed, they can sell the home and keep any money from the sale, as well as the money you already paid on the loan (your equity).
The scammer usually doesn’t sell the home back to you. But if they do offer to sell it back, the terms of the deal often are so expensive that buying back your home becomes impossible. In fact, the scammer sometimes raises the rent over time, and after you miss several rent payments, you're evicted. That leaves the scammer free to sell the home.
Equity-Skimming Scams
Scammers say: “If you sell us your home, we’ll help you. You can get your home back once you’re on your feet again.” Others trick you into selling them your home for cash for much lower than the selling price of similar homes in your neighborhood. These scammers promise to find a buyer for your home — only if you sign over the deed to them and move out. They promise to give you a portion of the profit when the home sells.
Once you sell your home to the scammer (and transfer the deed), they simply rent out the home and pocket the rent money while your lender goes ahead with the foreclosure.
You lose your home — and you’re still responsible for the unpaid mortgage. Transferring the deed doesn’t change the fact that the mortgage is yours.
Bait-and-Switch or “Rescue” Loan Schemes
Scammers say: “We’ll help you get a deal on another loan (a “rescue” loan) so you can make your mortgage current.”
The scammer hands you a stack of papers to sign for the new loan. They may pressure you to sign the papers quickly, without giving you a chance to read them thoroughly or giving you time to follow up on any sections that you don’t understand.
The scammer rushes you because buried in the stack is a document that gives them the deed to your home in exchange for the loan. If you transfer the deed to the scammers, they can sell the home and keep the money made from the sale. They also can evict you. You must still pay back your original mortgage loan.
This article is provided by the Federal Trade Commission (FTC). For more information, visit consumer.ftc.gov.
