The predominant foreclosure Rescue Scams appear to come in 3 varieties.
The 1st might be called Phantom Help, where the RESCUER charges outrageous fees either for light-duty phone calls and paperwork the Homeowner could have easily performed, or on a promise of more robust representation that never materializes.
In either event the Homeowner is usually left without enough assistance to actually save the home but with little or no time left to prevent this grievous loss by the time they realize it. The RESCUER essentially abandons the Homeowner to a fate that might well have been prevented with better intervention.
A 2nd variety of the scam is the Bailout that never quite works. This scenario includes various schemes under which the Homeowner surrenders title to the house in the belief that they are entering a deal where they'll be able to remain as a renter and buy it back over the next few years. Homeowners are sometimes told that surrendering title is necessary so that someone with a better credit rating can secure new financing to prevent the loss of the home.
But the terms of these deals are almost invariably so onerous that the buyback becomes impossible, the Homeowner permanently loses possession, and the RESCUER walks off with all or most of the home's equity.
The 3rd variety is a Bait-and-Switch where the Homeowner does not realize they are surrendering ownership of the house (for a ridiculously small fraction of its actual value) in exchange for the Rescue. Many Homeowners later insist that they believed they were only signing documents for a new loan to make the mortgage current and that they had no intention of selling or giving up their home to anyone.
It's important to note here that
· A substantial number of these cases involve fraud and forgeries of deeds.
· Worse, in many cases the original homeowner is left holding the original mortgage on the home they no longer own!
Here's an outline of typical tactics employed in these scams:
· The RESCUER finds distressed homeowners through public foreclosure notices in newspapers or at government offices. These records are more readily accessible than in the past because they're computerized and more private firms now compile and sell the lists. The Homeowner has not been foreclosed on yet, but is merely threatened with foreclosure after falling behind on mortgage payments.
· The RESCUER then contacts the homeowner by phone, personal visit, card or flyer left at the door, or advertising. Initial contact typically revolves around a simple message such as "Stop foreclosure with just one phone call," "I'd like to $ buy $ your house," "You have options," or "Do you need instant debt relief and CASH?" This contact also frequently contains a "Time is of the Essence" theme, adding a note of urgency to what is already a stressful and possibly desperate situation.
· Initial meetings stress the promise of a "Fresh Start" – likely what a frightened Homeowner most wants to hear – and often feature written or recorded "Testimonials" from other Homeowners the RESCUE Scammer has supposedly saved. While it is true that these programs work for some, what's glossed over is the fact that Help often comes at a very steep price.
· Homeowners are also frequently instructed to cease all contact with lawyers or the mortgage lender and let the RESCUER handle all negotiations. (i.e. "We have learned that any discussion between you, the Homeowner, and the Mortgage Company or their Attorney(s) at this point, will preempt our efforts and prevent us from being successful.") This doubly devious tactic simultaneously cuts off access to legitimate re-finance and sale options while running out the clock on ways for the Homeowner to prevent their foreclosure.
· Once it's too late to save the home the property is either taken by the RESCUER or, having been drained of substantial equity through the RESCUER’s imposition of heavy fees and other charges, it’s simply lost to foreclosure.
· After things fall apart many Homeowners suffer the added stress and indignity of being duped and evicted by their RESCUER from the home they once owned.
· Separately, but also quite worrisome, this scam appears to have spawned a side industry of scam artists who teach others how to drain equity from homes facing foreclosure. These Scam Instructors often advertise their seminars under the disguise of Buying Real Estate With No Money Down, Cashing In On the so-called Pre-Foreclosure Market, or some such.
*This is in part an excerpt from the 2005
Dreams Foreclosed: The Rampant Theft of Americans' Homes Through Equity-stripping Foreclosure "Rescue" Scams.
Click Here to request a copy of the full 68-page report
