In 4 Foreclosure Scams to Watch Out For [1] we discussed some of the most prevalent foreclosure scams out there.
But how are you supposed to avoid these scams, especially since at the time when you are being approached you are most likely feeling vulnerable and extremely eager to get out of your present situation?
Below I’ve outlined clear signs and things to avoid when dealing with loan modification and other companies that deal with foreclosures.
How to Avoid Foreclosure Scams
- Objectively Go Over the Offer: One of the best ways to avoid a scam is to objectively look at what you are dealing with. Take the emotions out of the circumstance (no matter how difficult it will be to do this), and go over the deal with the same gusto as you would when comparison shopping for a car [2]. What is your gut telling you? Do you have any sneaking suspicions, and is the person you are dealing with answering all of your probing questions?
- Know the Limits of Help: No one can help 100% or even 90% of homeowners facing foreclosure. Always be suspicious of guarantees in this industry, and realize that you might be in a situation that will need to run its course (without the help of a company).
- No Information Should be Hidden Up Front: Companies offering you a deal have an obligation to tell you how it works before you sign up. If the offer sounds like you need to pay for something in order to receive more information, then walk away.
- Get it in Writing: According to the FTC’s MARS Rule [3], it is illegal for a company to charge you anything before giving you an offer for a loan modification or other type of loan relief in writing. On top of this, they must also provide a document from your lender showing the changes to your loan if you decide to accept your lender’s offer, as well as disclose all fees to you. All of this information should make you feel good about dealing with a company; any lack of this information should leave you suspect about who you are dealing with. It should be noted that a lawyer can charge you an upfront fee, so long as they meet certain requirements, such as they are licensed in the state where you live or your house is located, as well as they put any fees collected into a client trust account and notify you of any withdrawals.
- Scrutinize Ads for Suspicious Language: No company can guarantee a modified loan to you. Any language in an advertisement with a guarantee, or that says 90%-100% of clients receive help is very suspect. In addition to this, filing a bankruptcy will not stop your foreclosure; if a company is promoting this, it is fraudulent.
- Scrutinize Ads for Language Mandated by the FTC: According to the FTC, a company advertising for help with mortgages must use certain language, such as declaring that the company has no affiliation with the government, the company has not been approved by your lender or the government, and the company must disclose that your lender may not approve a loan modification. Even though the company may advise you to stop making mortgage payments, they are required by law to tell you that this may result in you losing your home and it may damage your credit. For a complete listing [3], check out the FTC’s website.
- Read All Documents Thoroughly: Do not go into robo-sign mode when signing any type of contract. Read through all of the pages, and write down any questions you have. Make sure you get answers to your satisfaction before signing onto anything.
Have you or a family member been offered foreclosure help, only to find out it was a scam?