When Renate Brevard of New Carrollton, Md., refinanced the three-bedroom home she purchased for $108,000 a few years ago, she thought she was doing the smart thing. Trouble is, she didn't know the lender was switching her to an adjustable rate mortgage. Her payments eventually went from just over $1,000 to nearly $1,600, which proved too much for her budget.
So Brevard sought help, and found it in a company that offered to take over the mortgage while they worked out a lower payment for her. She signed what they said was paperwork to lease her home from them, not realizing that she had actually signed over the deed to her home. She "leased" her home from them with the promise that she could buy it back later. That never happened.
She rented her home from the company for about two years before she got suspicious and hired a lawyer, who told her she had been scammed, but promised to save her home. He asked her for a retainer to get started on a loan modification, and she signed right away. He also told her to stop paying the lease-buyback company, and to pay him instead while he worked out new payment arrangements. As part of his legal services, he said, he would go to court and file motions on her behalf to keep her home out of foreclosure. He advised her to stop opening mail from the lender, and to forward any lender correspondence to him.
But the lawyer was scamming her, too. He never went to court on her behalf. By the time she realized, it was too late: After paying him $13,000, she and her two children came home one day in April 2009 to find their belongings in the front yard and her home in foreclosure.
More than a year later, Brevard is sad, hurt, bitter. "It took a while before I could go back to my old neighborhood to visit neighbors," she says.
But she has learned from her mistakes. "Make sure you read everything," says Brevard. "Don't just let someone point and say 'sign here.' You can't assume that even a lawyer is legit, look up everybody. This was such an ordeal because it was tough on my children. This is something none of us will forget."
"Life goes on," she says, and explains that she's working on forgiving her lawyer. Though she lost her home, she was able to recover the $13,000 she paid the attorney from the Client Protection Fund in Maryland.
Foreclosure Notices Attract the Scam Artists
America's foreclosure crisis remains in the headlines. October marks the 20th consecutive month during which more than 300,000 U.S. homeowners received a foreclosure notice. One in every 389 housing units received a foreclosure filing during October, according to RealtyTrac's U.S. Foreclosure Market Report for October.
While lately, the news has been about robosigners and the flawed procedures of banks, the worries don't end there. Many so-called foreclosure rescue companies or foreclosure assistance firms are scams forcing homeowners into even deeper debt and despair.
Once the bank files a foreclosure lawsuit, your name and address are publicly available.
"Right away you might notice letters, postcards, and phone calls offering you all kinds of deals," says Ronald Kanuik, co-managing partner at the law firm of Ricardo, Wasylik & Kasniuk, which specializes in foreclosures defense, bankruptcy and consumer issues." Most are legal, even if they aren't always in your best interest. But every year, more and more people are getting sucked into schemes and con games by people who want nothing more than to steal your money, your house, or both."
The problem has skyrocketed, and may get worse before it gets better, predicts Robert Eisenstein, president of HomeRun Homes, a rent-to-own marketplace operator. The bogus companies seem more concentrated in urban settings, where direct access to individuals in their homes is much easier, points out Scott Dillon, a bankruptcy attorney with Tully Rinckey. If you don't want to get kicked when you're already down, be smart and suspicious. It's not paranoia: They really might be out to get you. Here are a few things to remember.
Know the Familiar Scams. A lease-back or repurchase scam begins with a con artist's promise to pay your mortgage and lease your property back to you. But if you sign over the deed, you sign over all your rights. The new owner has the power to evict you, raise your rent, or steal the equity you have in your home, says Carol McKay, a spokesperson for the National Consumers League. Ir refinancing frauds, the con artist tricks you into signing over the ownership of your home by saying that you are signing documents for a new loan to lower your payments. Steer clear of anyone asking for a huge payment up front: They may just take the money and run.
Ignore the Hype. Simple and straight-forward messages, like "Stop foreclosure now", "We guarantee to stop your foreclosure," and "We have special relationships within many banks that can speed up case approvals" are red flags, according to the Federal Trade Commission. Be wary of "modification saviors," warns Darren Fish, an attorney with Fish Brydges & Associates. In fact, attorney Joseph McCaffery does not recommend modification unless it involves a reduction of the principal to current market value. "Otherwise, you're simply stacking substantial additional costs on the back end of the loan," he says. Consider a nonprofit and or government agency. They offer help for free. "We have seen a few clients successfully complete a modification process and see their foreclosure withdrawn by the lender and dismissed by the courts," he adds.
Know When to Run. Anyone who does the any of following is almost certainly a con artist:
Tells you not to contact your lender, lawyer, or credit or housing counselor;
Accepts payment only by cashier's check or wire transfer;
Tells you to make your mortgage payment directly to them, instead of your lender;
Offers to fill out paperwork for you;
Pressures you to sign paperwork you haven't had a chance to read thoroughly
Get away from these people -- fast. Those scenarios are unlikely to end in your favor.
So where should you go when you need help?
"Don't panic," cautions Eisenstein of HomeRun Homes. "Once you panic, you lose. Don't take the bait from the first company you meet. Make sure you don't create exponential problems along with the current problems of impending foreclosure."
You can start with a counseling office that is certified by the U.S. Department of Housing and Urban Development. They receive financial support so they can provide services for free. Your city, county or state may also have resources. Also, check out organizations like NeighborWorks.
Due Your Due Diligence
Thoroughly investigate any organization that you are about to entrust with the task of helping you through this crisis. Check with the Better Business Bureau for any complaints. Google them and see what pops up. Check the age of the organization's website at Networksolutions.com. Get references. Better still, get a referral from a family member, friend, or your accountant.
You can also ask your local bar association for names. But they key is to ask for help. "Scammers prey on those who are embarrassed, ashamed and scared. Any attorney will take a couple of minutes to talk to you free of charge if you ask," says Fish. Know too, that while it's best to reach for help early, it's never too late to seek advice, adds Bruce McClary, a certified credit counselor with ClearPoint Financial Solutions, a nonprofit that offers housing counseling.
If you think you're a victim of foreclosure fraud, you should contact the FTC, your state attorney general or your local Better Business Bureau.
Says Fish, "It doesn't matter what the reason is why you're in foreclosure. It does matter that you fight back to make sure you are not being unknowingly robbed of your greatest asset."