avoid foreclosure

5 Tips for Avoiding Foreclosure Rescue Scams

The possibility of losing your home to foreclosure can be scary. The reality that scam artists are preying on the vulnerability of desperate homeowners is equally horrifying.

Do you know how to recognize a foreclosure rescue scam?

The foreclosure rescue scam begins with a promise to save cash-strappped homeowners from losing their home. This is generally facilitated by having the homeowner pay upfront fees to stop the foreclosure and/or to secure a new home loan. The foreclosure rescue company will even entice the homeowner and calm their fears with a money-back guarantee.

What’s better than a money-back guarantee?

Another common way the foreclosure rescue scam unfolds is when the homeowner is told to sign over the home’s deed to the fraudulent foreclosure rescue company in order to stop the foreclosure. Once the deed has been trasferred, the homeowner is instructed to halt communication with their existing mortgage company and to make all payments directly to the foreclosure rescue company.

Why would a homeowner willing sign over their home’s deed?

The homeowner under duress and fearful of losing their home is told they can rent their own home until they are financially stable. When the homeowner is back on their feet, then they could buy back their home.

Unfortunately, the primary goal of the foreclosure rescue scam is to make a quick profit through upfront fees, unapplied mortgage payments and liquidating all the available equity. The homeowner never had a chance despite their best intentions.

Here are 5 Tips for Avoiding Foreclosure Rescue Scams as outlined by The Federal Reserve Board.

Work Only with a Nonprofit, HUD-Approved Counselor

Don’t Pay an Arm and a Leg – Don’t Pay Fees Before Services Performed

Be Wary of “Guarantees” – Legitimate Counselor Can Improve Chances

Know What You Are Signing and Be Sure You Sign It – Don’t Sign Blank Forms

If It Sounds Too Good To Be True, It Probably Is – Commen Sense

It can’t happen to you…can it? Just watch “Real People, Real Stories: Avoid Foreclosure Rescue Scams“.

The Federal Trade Commission (FTC), the nation’s consumer protection agency, wants you to know how to recognize a foreclosure rescue scam. And even if the foreclosure process has already begun, the FTC and its law enforcement partners want you to know that legitimate options are available to help you save your home.

avoid foreclosure

Complexities of Short Sale Transactions by Samantha Taylor

Short sale is often the best choice for the distressed homeowners (the mortgage borrowers) to avoid foreclosure on the property. It is a process by which the lender agrees to accept less than the outstanding mortgage balance. Apart from benefiting the homeowners, a short sale is advantageous for the lenders, too. A foreclosure is often time-consuming and expensive for a lender. However, there are often complexities and difficulties associated with a short sale. 

One of the major complications of a short sale is its long waiting time. Often banks take several months to respond to a short sale offer. Moreover, a short sale involves dealing with several parties because of which the process may take about 2-6 months to get completed, as compared to about only a month in case of a normal sale.

The situation worsens more when the homeowner has to deal with more then one lender. It happens when there are two or more liens on the property. The success of a short sale also gets reduced in such situations. This is because the second and other lien holders must agree for a short sale to happen. All the lien holders need to agree on accepting an amount less than the balance owed.

The lenders become more hesitant to agree on a short sale especially when it is a non-recourse mortgage loan. In case of such home loans, the lenders cannot go after the homeowner to recover the deficit amount. In case of a recourse mortgage loan, the lender usually can file a lawsuit and if the court issues a judgment order, the mortgage borrower has no other alternative than to pay back the deficit amount or else he/she has to face legal issues.

Moreover, the real estate agents need to follow various guidelines that are incorporated by the mortgage companies and the investors on the mortgage notes. The operating rules vary from one mortgage company to the other. This makes the process even more complex and difficult. It may happen that several investors situated at different parts of the world own a specific mortgage note. In such a circumstance, multiple negotiations are required so as to come to a conclusion regarding a loan payoff amount.

However, the homeowners can opt for a short sale under the HAFA (Home Affordable Foreclosure Alternatives) program. It helps minimize certain complexities as well as the homeowners can avoid foreclosure on the property that has damaging effects on their credit record. The program is beneficial for the lenders and investors as they receive financial incentives to participate. However, not many lenders allow the homeowners to opt for HAFA. This is because the lenders have to calculate the minimum net proceeds (eligible for HAFA) before allowing the homeowners to take help of the HAFA program.