Foreclosure Sign on For Sale Sign

Beware of Foreclosure Scams

Scams related to mortgage problems and foreclosure are rife in the real estate industry, and when a deal looks too good to be true, it usually is.

Always beware of the home buyer who tries to rush individuals through the sales process because unfortunately, some people will try to take advantage of another person’s financial difficulties. Sometimes, homes can be used as collateral for a bail bond, but you should contact a good bail bonds man for further details.

Equity Skimming

With this form of scam, the home buyer approaches the unwitting homeowner in what appears to be an act of goodwill. They promise to pay off the mortgage for a sum of money after the property sells. The buyer might carefully suggest the homeowner moves out quickly and transfers the deed to him or her. The buyer says they will then collect rent for the time, and this lets the lender foreclose the home. People have to remember, however, how signing a deed over to another people doesn’t mean they will be relieved of their obligation on a loan.

Balloon Payment

Let’s say a person fell behind on their mortgage payment, and now they face foreclosure. The lender might offer to save the person from foreclosing with a refinancing of the mortgage and lowering the monthly payments. People should look at the terms carefully because a lower payment might actually be how the lender lets the person repay the interest. When the term ends, the entire amount borrowed will be owed in what’s referred to as a balloon payment, and if a homeowner can’t pay the balloon payment or refinance their home, they will face foreclosure and the loss of their property.

Sign over the Deed

For those struggling to pay their mortgage with an angry lender threatening to foreclose on the home, the situation might feel desperate. During that time, a lender might contact the distressed homeowner to help them with financing the home. Here’s where the trick comes in at. Before the lender can help, he says he needs the deed to the person’s property. He claims it’s a temporary procedure to stop the foreclosure and promises to refinance the home to save it. However, the refinancing never comes through, and once this lender has acquired the deed of the home, he treats it like his own property. He can borrow against the property or sell it to someone else because the homeowner no longer has rights to the home. Even if the unscrupulous lender sells the home, the homeowner receives no cash for it because the property is legally his. The homeowner is then treated like a tenant, and if the rent payments are late, he can evict the homeowner.

Fake Counseling Agencies

Some groups have referred to themselves as a counseling agency. They might approach a homeowner and offer their services for a fee. Many times, these services are things the homeowner could do on their own. For example, pursue a pre-foreclosure sale or set up a new payment plan with the lender.

Never Sign Cryptic Papers

Mortgage and foreclosure scams will often rely on locking the oblivious homeowner into a contract they don’t understand. People have to remain wary of contracts, and they should make sure they have gotten all the promises in writing. What’s expected of each party should be outlined, and homeowners should beware of contracts where a sale of loan has not been formally released.

For those who plan to sell the home themselves to avoid foreclosure, they should first check if complaints against the prospective buyer have been filed. To do this, call the state Attorney General, the local District Attorney’s Consumer Fraud Unit or the State Real Estate Commission for information. It might cost a little to hire a lawyer, but before a homeowner enters into a deal, he or she should first understand what he will be getting into. In some cases, a person may not even be formally released from the liability of a mortgage debt.

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