Duff to Homeowners: Beware of Foreclosure Rescue Scams

With foreclosure rates high, con artists try to prey on desperate homeowners

Norwalk, CT – October 27, 2008 – (RealEstateRama) — Homeowners facing financial difficulty and foreclosure should beware of con artists promising to “rescue” them from their troubles and investigate state-sponsored programs designed to prevent foreclosure actions first, state Senator Bob Duff (D-Norwalk) said today.

“With high foreclosure rates in Connecticut and around the country, scam artists are preying on the vulnerability of desperate homeowners,” said Senator Duff, who serves as Senate chair of the General Assembly’s Banks Committee. “Since mortgage lenders publish notices before foreclosing on homes, potential victims are easy for the unscrupulous to find. They often use a variety of tactics to coerce homeowners in distress to trust that, for a fee, their foreclosure worries will disappear. Connecticut has the 17th highest foreclosure rate in the country, so homeowners need to be aware and to protect themselves from con artists who want to take advantage.”

Foreclosure rescue scam artists often market “foreclosure services” or a “foreclosure rescue agency” and promise to help those at risk of losing their home resolve their financial difficulties for a fee. Instead of assisting, the scam artists take property, ruin credit, siphon off home equity and leave with the fees paid up front.

“Before you turn to an ad on the Internet or a flyer stuck in your front door, contact your lender and look at some of the programs the state has in place to help homeowners facing foreclosure,” said Senator Duff. “The state offers mediation programs, job training and placement services and financial assistance programs to those who qualify.”

According to the Federal Trade Commission (FTC) — a federal agency that works to prevent fraudulent, deceptive and unfair business practices and to provide information and assistance to consumers — the scams can take several forms:

• Phony counseling: The scam artist offers to negotiate with your lender to save your house if you pay a fee first. Once paid, the scammer takes off with your money.
• Bait-and-switch: You’re convinced to sign documents for what you think is a new loan, when in reality you’re surrendered the title of your home.
• Rent-to-Buy: You’re told to surrender your title as part of a deal that allows you to stay in your home as a renter and buy back the property over the next few years. However, the terms are so burdensome that buying the property becomes impossible, you lose the home and the scam artist walks off you most or all of your equity.
• Bankruptcy foreclosure: The scam artist offers to negotiate with your lender to save your house if you pay a fee first. Instead of contacting the lender, the scammer files a bankruptcy case in your name and pockets the fee. A bankruptcy filing stays on your credit report for 10 years and can make it difficult to obtain credit, buy a home, purchase life insurance or get a job.

The FTC offers several red flags for homeowners. If you’re looking for foreclosure prevention help, avoid businesses that:

• Guarantee to stop the foreclosure process, despite your individual circumstances;
• Instruct you not to contact your lender, lawyer or housing or credit counselor;
• Collect a fee before providing any services;
• Accept payment only by cashier’s check or wire transfer;
• Encourages you to lease your home so that you can buy it back over time;
• Tell you to make your mortgage payments directly to it, rather than to your lender;
• Tell you to transfer your property deed to title to it;
• Offer to buy your house for cash at a fixed price that us not set by the housing market at the time of sale;
• Offer to fill out paperwork for you; or that
• Pressure you to sign paperwork you haven’t had a chance to read thoroughly or that you don’t understand.

If you believe you’ve been the victim of a foreclosure rescue scam, contact the FTC to file a complaint. Visit www.ftc.gov or call toll-free 1-800-FTC-HELP. Additionally, contact the state attorney general’s office 860-808-5318 to file a complaint.

For more information on the state’s foreclosure mediation program, contact the Connecticut Judicial Branch’s Superior Court Operations Unit at 860-263-2734.

For information about financial assistance programs for homeowners facing foreclosure, contact the Connecticut Housing Finance Authority at 860-721-9501 or visit www.chfa.org.

For information on job training and placement services, contact The Workplace, Inc. at 866-683-1682 or visit www.workplace.org/mortgage.asp.