Advice to Help Avoid Mortgage Foreclosure Scams
Cuts in Property Price lead to Negative Equity and Home Repossession
May 30, 2009
US house repossessions increased in March 2009 by 46% against the same period the previous year, according to foreclosure authority Realty Trac. Much of this dramatic rise is blamed on the ending of the moratorium on foreclosures by leading American banks and other lending institutions, including the troubled Fannie Mae and Freddie Mac.
To exacerbate the situation there are, said First American CoreLogic in December 2008, a further 2.2 million mortgaged properties, throughout the country, within 5% of falling into negative equity.
US Foreclosures
More than one million people have lost their homes in the US and President Obama said a further six million were at risk of foreclosure (BBC News). The recent package of housing measures announced by the President is aimed at providing refinancing to four or five million “responsible homeowners” on the verge of defaulting on their mortgages but will sadly be too late for many people who are trying to stop repossession.
With many homeowners now facing the possibility of foreclosure what steps should they be taking?
Advice for Avoiding Foreclosure Scams
- Work only with a Department of Housing and Urban Development (HUD) counselor. The Department sponsors counseling agencies across the country that will give advice on a range of housing matters, including foreclosure. Their website has a state-by-state list of approved agencies.
- Homeowners in financial trouble, anxious to stop repossession, should not have to pay excessive amounts for a counseling service. HUD approved counselors will provide a low cost or no cost service. Do not work with an agency that asks for a fee before giving advice.
- Be wary of any agency that promises to prevent the foreclosure process. A reputable counselor will never give this guarantee.
- Make sure all the paperwork is scrutinized carefully before being signed. If unsure take appropriate advice before signing. Seek advice from an attorney before signing any document that transfers the title of the house to another party.
- If it sounds too good to be true, it probably is.
The Federal Trade Commission for the Consumer (FTC) also offers some excellent advice on how the scams work. Although written in February 2008 the advice is still good today.
“Foreclosure rescue firms use a variety of tactics to find homeowners in distress. Some sift through public foreclosure notices in newspapers and on the Internet or through public files at local government offices and then send personalized letters to homeowners.”
It’s at this vulnerable time in their lives that people are most susceptible to the scammers who offer a sympathetic ear and a helping hand. The very simple advice is to say no to a direct approach. A reputable counseling agency will never do business in this way.
Sources:
Federal Reserve Board, Five Tips for Avoiding Foreclosure, April 28, 2009
Lynn Adler, US Foreclosures Filings Jump as Moratoriums End, Reuters UK, April 16, 2009
First American CoreLogic, Homes Under Water, December 2008
Les Christie, Foreclosures up a Record 81% in 2008, CNN Money 15 January 2009
BBC News Channel, Obama’s Housing Plan, Feb 18, 2009.
The Federal Trade Commission for the Consumer, Foreclosure Rescue Scams, Feb 2008
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