Protecting yourself from scams

Being faced with a financial hardship which is jeopardizing homeownership can leave many people vulnerable to others who take advantage of such situations. If you are experiencing such difficulties — particularly if you’re behind on your mortgage and seeking a solution — you can help protect yourself from becoming a victim if you’re aware of some of the tactics that scammers use.

In general, you should be very wary when an individual or a company (other than your lender or a certified HUD counseling agent) offers to step in and rescue you from foreclosure. If somebody offers you a deal to save your home that sounds too good to be true, it probably is. Additionally, knowing some common tactics used by scammers may help keep you from becoming a victim. Here are some things to watch out for:

• Phantom help: In this type of scheme, scammers present themselves with misleading titles such as “distressed property consultants” and offer to “buy you time” to deal with your financial issues. They collect fees up front, claiming that they’ll negotiate with your lender on your behalf, but they actually do nothing for you and run off with your money.
• Equity skimming: In this foreclosure rescue scheme, a scammer offers you what looks like a solution that will let you keep your home, but they actually trick you into signing over your home and your equity to them. Before you know it, you’re essentially a tenant paying high rent to the scammers.
• Bait and switch: Similar to equity skimming, this scenario involves scammers convincing you to turn over ownership of your home to them — typically with a document called a quitclaim deed. They promise that you’ll be able to buy back the home once your finances are in order, but they often sell the home to another buyer before you can repurchase it and pocket the profits.
• Lease buyback: These scammers lure you in by promising to line up an investor who will help you keep your home by temporarily taking over ownership while you pay rent and rebuild your credit history. Although they promise that you’ll be able to buy the house back, the investor actually takes out a larger mortgage on the property, and the investor and the scammer walk off with your equity. At that point, the larger mortgage on the property is too much for you to qualify for or afford.

To help protect yourself against these scams, keep these guidelines in mind:

• Never sign any papers under duress.
• Never sign agreements you don’t understand completely, or those with blank lines or spaces.
• Don’t sign over your deed to a third party or agree to any deal that lets you rent the property and buy it back later.
• Don’t make your mortgage payments to anyone other than your lender or servicer.
• Get it in writing. If someone is offering you a solution, ask that person to put it in writing.
• When in doubt over any deal or resolution involving your home, call your mortgage company or an attorney.

If something doesn’t sound right to you, walk away.