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Monday, October 15, 2007
Foreclosure-related scams
The CNNMoney.com article discusses the new scams that have come up targeting homeowners facing default on their mortgages and potentially facing foreclosures. The article discusses the plight of Jennifer Falke from Columbus, Ohio, who was out of work and fell behind on her mortgage. She got bombarded with mailings from foreclosure rescue companies, promising her that they will work with her lenders and prevent her from losing her home. In the end, however, she got little assistance from the foreclosure rescue company for the $1,200 upfront payment she made to them.

Such scams are often targeted towards low-income minorities, the elderly or immigrants in poor neighborhoods who are the most vulnerable.

"A client of Jessica Attie of South Brooklyn Legal Services, was a mentally ill woman with a $60,000 mortgage balance that carried an interest rate of more than 10 percent. She was falling behind on payments, had few other resources and wanted to reduce her payments. Attie said a scam artist convinced her client to sign over her title while he cleared up the arrears. She could rent the home for six months, and then he would sell it back to her. Instead, according to Attie, the scammer resold the house and absconded with more than $400,000."

As per the article, the most common scam is "equity stripping" where the scammer promises to save the home by taking title, renting the home back to its owner and then selling it back to the home owner sometime later. In reality, however, the scammer "strips the equity by charging excessive fees, doing phony renovations and not making the mortgage payments."

Other scam tactics include:

-Saturation marketing: scammers bombard home owners with mailings, flyers etc based on mortgage delinquencies through published reports
-Exploiting trust: scammers build trust by being sympathetic
-Isolating owners: Scammers assure victims that they'll handle everything, telling them instead not to call lenders or seek legal advice
-Outright fraud: Scammers have homeowners sign blank papers and fill them in afterward or use deceptive techniques to get a document signedAffinity marketing: such as aligning with sometimes evangelical church congregations to build trust

To avoid such scams, the article recommends that you never trust anyone who has contacted you, unsolicited, offering to help. Instead get in touch with your lender to work out a plan.

"If in doubt, get in touch with your state attorney general's office."

The following quote at the end of the article nicely sums up what many of us feel about scammers:

"The ingenuity of people who would rather cheat than work hard is unending"

For complete article, see:

CNNMoney.com: Foreclosure fallout: Rescue scams


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posted by Ruby @ 8:01 AM  
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