Beware of Home Mortgage Foreclosure Rescue Scams

Sometimes financial hardship or other circumstances beyond a person’s control can cause homeowners to fall behind on monthly mortgage payments putting them in danger of losing their home in a foreclosure proceeding. When a lender forecloses on a property, a public notice is issued in a newspaper of general circulation. That public notice is one of the ways in which a home mortgage foreclosure rescue scam can be triggered.  The individual or the company, armed with the information published by the lender, makes a visit to your home or calls you on the telephone and offers to lend money to the homeowner in order to “stop foreclosure” or “save your house”.  Other ways include advertising through a flier, a billboard, or a general mailing, urging homeowners in financial trouble to contact them.  They will often refer to themselves as “foreclosure rescue specialists”.  No matter how it starts, it is almost always a scam and often involves fraudulent conduct.

In most cases, the ‘loan’ is not a loan.  Unbeknownst to the homeowner, the so-called specialist actually buys the home for much less than the fair market value of the house and gives the homeowner only enough money to make the mortgage payments current.  Moreover, because the specialist does not agree to pay off or assume the homeowner’s mortgage, the homeowner remains responsible for the mortgage but no longer owns the property.  In some instances the homeowner is given a limited period of time in which to buy back the house from the specialist for a sum substantially in excess of the mortgage – and usually more than the foreclosure rescue specialist paid for the home in the first place.  In order for the former homeowner to remain in the house, he or she must also pay rent to the new owner, the foreclosure rescue specialist. 

To avoid being scammed: 

• If you are having problems making your mortgage payments call or write to your mortgage lender immediately and be honest about your financial situation. Ask about renegotiating your loan or working out a payment plan.  The sooner you contact your lender, the easier it will be to work out a solution.

• Contact a government-approved housing counselor. Counselors are listed by state on the Department of Housing and Urban Development’s Website at www.hud.gov

• If you are a senior, contact the New York State Office for the Aging Senior Citizens' Hot Line (800) 342-9871.  Elderly homeowners on a fixed income can consider a reverse mortgage. A certified housing counselor can help a homeowner decide if a reverse mortgage is right for them. For more information visit the AARP’s Website at www.aarp.org/revmort

• Common sense should tell you: Never do business with anyone who comes uninvited to your door, calls you on the phone or whose name you find randomly on a flier.  

• Never sign any papers without reading them and never enter into any agreement – especially if it involves your home – without consulting your own lawyer (not one supplied by the individual pursuing the agreement).

• Get a lawyer.  Call the Bar Association’s Lawyer Referral Program at (800) 342-3661 or visit www.nysba.org on the web, to find an attorney willing to help you fight the foreclosure.

• If you are low-income, look for free legal services in your area. Visit www.lawhelp.org/ny to find legal services, community groups, government agencies and other resources in your area that can help you keep your home. 

If you think you’ve been scammed:

• Contact the Consumer Protection Board at http://www.consumer.state.ny.us/ or call (800) 697-1220.

• If you think your mortgage lender has included terms which may be illegal in your loan agreement, contact the Banking Department at (877) BANK-NYS or at www.banking.state.ny.us/ccs.htm to file a complaint.

• Contact the New York State Attorney General’s consumer hot line at (800) 771-7755 to report possible fraud.