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During an economic downturn, especially involving real estate, there is almost always someone around to take advantage of homeowners. Now, with an increase of foreclosures, we have a number of foreclosure scams starting or continuing to operate. Homeowners facing foreclosure should beware of foreclosure scams. Scammers can cause the homeowner to lose both the home and the equity they have built.

Many scammers contact homeowners offering to “save” their houses. Property information is a matter of public record and fairly accessible by anyone interested in obtaining it. In addition to the informa­tion recorded with the county when the home was purchased, notifications of default filed by the lender or a lien holder or if the house is subject to an auction or to be foreclosed are all public record. Unfortunately, unscrupulous individuals can use this informa­tion to take advantage of homeowners in distress.

Other times, homeowners facing foreclosure may respond to ads offering to pay cash imme­diately for houses. Although this sounds like a quick solution, it may not be the right option if the ultimate goal is to keep your home. Care is advised, because many of these offers may also be scams. Scammers are particularly interested in proper­ties where homeowners have been living for a long time or there is an indication the homeowner has built a significant amount of equity. The schemes vary depending on what the scammer is trying to obtain. For example:

• Scammers advertise their services to nego­tiate with the lender on behalf of the homeowner to save the house. They often collect fees up-front, usually one month’s mortgage payment. The scammers prohibit the homeowner to contact the lender so the process will not be “disrupted.” In many cases, the scammers do very little or nothing to help consumers.
• In other cases, scammers will convince the homeowner to convey or give up the title of the house with the promise to return the house after it has been taken out of the fore­closure process. Scammers commonly pay the homeowner an amount significantly less than the real value of the home, sometimes as little as $1. In some cases, the deal includes a rental agreement where the homeowner pays rent, which can be more than the original mortgage payment. The homeowner is still respon­sible for the payment of taxes, insurance, and other obligations as if nothing has changed except for the ownership of the house. Since the homeowner no longer has the title, the scammer can evict the homeowner if he or she does not pay the rent.
• Some scammers say they will help home­owners save their house by refinancing the loan in default. They ask the homeowner to sign papers that appear to be refinancing or lease-to-buy agreements. But in most cases, the documents give the scammer the title of the house.

There are legitimate companies that are set up to negotiate for the homeowner in foreclosure difficulty. Also, consider the FHA Secure Short Sale refinance (until Jan. 1, 2009) or look into the FHA Hope for Homeowners (H4H) program. There are nonprofit and for profit companies that will help the homeowner negotiate for themselves in this process also. Another prime method of avoiding foreclosure for seniors is the Reverse Mortgage. There are several ways to avoid foreclosure though other means.

The Mortgage Rescue Fraud Protection Act, passed by the Oregon Legislature in 2008, provides protection for homeowners facing foreclosure who are targeted by these scams. The law addresses “foreclosure consultants,” who offer to help a homeowner negotiating with the lender or financial institution to save a home, and “equity purchasers,” who acquire the title of a home in foreclosure.

The law requires that foreclosure consultants or equity purchasers provide the homeowner with a contract with clear disclosures at least 24 hours before they are personally signed and dated. The law also gives homeowners the opportunity to cancel the contracts.

If you, as a homeowner, decide to use such services to help you save your house or any type of assistance when your house is at risk, you should take the time to read the entire contract before you sign it! While the law has some protections and restrictions to prevent fraud, signing a contract means you agree with the terms and condi­tions included in it. It is strongly recommended you seek legal assistance to make sure you are protected by the provisions of this new law.

Contact the Oregon Attorney General Office if you or someone you know is a victim of a foreclosure scam. State Attorney General Office:  877-877-9392, www.doj.state.or.us,  E-mail: consumer.hotline@doj.state.or.us. Please contact me if you have questions, I will be happy to help or refer you to a reputable professional.

Article Written By:  Fred Chamberlin, A Eugene/Springfield Mortgage Consultant – 541-342-7576