a fraud alert warning sign shows up on a computers screen, real estate lawyer

Foreclosure fraud tends to run rampant among distressed homeowners despite increased attention from regulators, law enforcement, and the media, and people who are at risk of losing their homes should be extra cautious when considering foreclosure solutions.

One of the most common schemes that homeowners should watch out for is a rescue type of fraud where the perpetrator, claiming to be a real estate investor, promises to pay off the debt owed to the mortgage company and allow the homeowner to stay in the property. The homeowner typically loses their home, any equity in the property, and additional money they were told was necessary to refinance the home.

Common red flags of the “rescue” foreclosure fraud

Anyone demanding payment upfront to obtain a mortgage modification should raise questions about the validity of the service. There are some limited circumstances when up-front payments are appropriate. A Chicago real estate lawyer can explain when up-front payments comply with all state laws and regulations. Many fraudsters claim they can guarantee a modification and pressure struggling homeowners to sign papers right away. Only a mortgage company can agree to a loan modification.

Variations of the foreclosure rescue scam

Some homeowners are tricked into unknowingly transferring their property title to a third party. Other times, the fraud perpetrator may promise homeowners that if they transfer the title they can remain in the home and pay rent to an investor until they are able to repurchase the property at a future date. If the homeowner does sign a transfer of title, the con artist is then able to refinance the property, sell the property, and benefit from any existing equity. Sometimes the “rescuer” will simply make a lot of empty promises to convince the struggling homeowner to pay a ‘service fee’ and then will disappear with the money or give the homeowner excuses as to why they do not qualify for the service.

Many states are considering and enacting legislation to prevent foreclosure fraud. Consumers should communicate directly with their lending institution if they are unable to make loan payments as agreed in their mortgage terms.