Q: Because I lost my job almost six months ago and haven’t been able to find another one that pays enough, I have fallen behind in my mortgage payments. Next month will be the fifth month I’ve missed my payment. My wife and I have been getting letters and postcards every day from companies, including lawyers, who say they can “rescue” us from our mortgage and save your house. “Rescue” is actually the term most of them use. We read your column every week and you have touched on loan modification scams. But are these “rescue” things a scam too? They sure sound good.
A: Yes they are and I imagine they sound good because a scam wouldn’t last very long if it didn’t. Right?
Over the past several years I’ve been keeping a file of the advertising, including mailers, that people bring in to me and, after a while, you start to see a pattern develop.
The first thing you notice is that there are a whole lot of truly evil, morally bankrupt people in society. The minute someone is down on their luck and in trouble, there are jerks willing to swoop in with promises of salvation if you’ll just give them a check or credit card.
The second thing you start to notice is that most of these crooks aren’t all that creative and their scams are just minor variations of the same basic scams.
Regarding mortgage rescue scams, they generally fall into just three general categories.
1. The Foreclosure Consultant Scam
This scam typically sounds formal and professional. For a small, or large, amount of money, this firm will become your foreclosure consultant, working with the bank in order to get them to cancel the foreclosure, and possibly to get them to modify your mortgage.
It sounds plausible because there are legitimate credit consultants that work with people who have too much credit card debt.
But, at least for this purpose, there’s no such thing. At least not one who will solicit you by mail. The truth is that about the only person other than you who the bank will even talk with would be your Realtor. And only then if there is a short sale in progress.
The scam here is that they take your badly needed money and you still lose the house. Better to lose the house with as much money as possible still in your pocket.
2. The Sale and then Leaseback Scam
This comes in a variety of flavors, but goes something like this:
“We will buy your house from the bank and then lease it back to you. Then, when you are able to, you can buy the house back from us for what we paid for it.”
Sounds plausible. Right?
The problem is, chances are you owe more to the bank than the house is worth. Who is going to pay the bank 100 cents on the dollar for your house?
Nobody in their right mind.
There are plenty of homes available for today’s low market price.
What the scammers will do is take a deed from you, telling you they’ve bought the house. The mortgage company knows nothing about it.
You’ll start paying an extortionist amount of rent to the scammer.
Then, maybe six to 12 months later, depending upon how far you were along the process when you started, the house is lost to foreclosure.
In the interim, the scammer has pocketed your monthly payments, leaving you with no home and no cash.
3. The “Bankruptcy will save your home” scam.
This is perpetrated typically by people who suggest they are attorneys when they are not.
The idea is they will file for bankruptcy protection on your behalf, immediately stopping the foreclosure sale.
Like any good scam, this one is based on partial truths.
If someone who is in the process of foreclosure files for bankruptcy, something called an “automatic stay” goes into place, temporarily preventing the bank from moving forward.
The important word here is “temporarily.”
Within two months or so the bank will be able to foreclose, leaving you without your house and with a bankruptcy on your record.
Now for many people a bankruptcy makes sense. But only a bankruptcy attorney, after getting all of your financial information and meeting with you, can make that determination.
The bankruptcy scam depends upon convincing the troubled homeowner that simply filing for bankruptcy will allow them to keep their home. It won’t.
I’ve seen a number of instances where these scammers actually fill out the bankruptcy filing paperwork and email it to the homeowner. Since the scammer isn’t an attorney, they can’t file the paperwork with the bankruptcy court on your behalf, leaving the homeowner to try and figure it out.
In general, if someone contacts you, either by phone or mail, saying they can help you with your mortgage, you should assume it’s a scam unless someone can prove, and I mean really prove, otherwise.
Tim Jones is a real estate attorney in Fairfield. If you have any real estate questions you would like answered in this column you can contact him at SolanoScene@TJones-Law.com.