Federal Trade Commission Advises Consumers to Beware
There are few things more stressful than being behind on your mortgage or facing the possibility of foreclosure. Unfortunately, there are unethical people out there who want to take advantage of your anxiety and fears. Here are a few to watch out for:
- The phony class action—In one high-profile fraud case, companies advertised that qualified consumers could join a class action mortgage fraud lawsuit against certain banks and lenders. The company initially said the cost would be limited to a one-time charge of $895. Victims were told they had a “strong case,” when most of the lawsuits were summarily dismissed. The victims also were convinced to send monthly payments even after the legal action was terminated. In many instances, no lawsuit was ever even brought on behalf of the victims.
- The phony counseling or debt negotiation—Another common scam involves a company that promises, for a fee, to negotiate a deal with your lender either to reduce your payments or extend the term of your loan to make it more affordable. You may be asked to make payments to the company while the negotiation is in process. At some point, though, the company will disappear.
- Rent-to-buy schemes—In this con, a company or individual encourages you to transfer title to your home as part of an arrangement that allows you to stay in your home, rent it from the company while you get your finances together, and then buy it back at a later date. The company promises you’ll get a better rate and better terms when it comes time to repurchase, but generally the opposite is true. You’ll find that you can’t afford the terms, and you no longer own your home. The scammer may even raise the rent to a level you can’t afford and then evict you. Or the con artist may promise to sell the house and give you a portion of the profits, but that won’t happen.
- Bait-and-switch cons—In another scam, you receive a pile of documents to sign purportedly to refinance your home. Hidden in the legalese is a provision that conveys title to your home in exchange for a “rescue loan.”
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