Scam Companies Target Mortgage Relief

AMA4-11-13Scam artists have a long history of targeting the desperate, and after the housing collapse of a few years ago, numerous homeowners were placed in just that position. Now, scammers are moving in on legitimate avenues for mortgage assistance with fake companies and extravagant claims that cheat struggling mortgage holders of fees and even mortgage payments. And, because these homeowners never got the legitimate help they needed, they may be victimized twice – losing the home to foreclosure as well as losing money to the scammers.

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After the housing crash of a few years ago, a variety of mortgage relief programs, or mortgage bailouts, appeared. Legitimately offered by government housing agencies and federally subsidized entities like Freddie Mac and Fannie Mae, as well as private lenders such as credit unions and banks, these programs offered struggling property owners a chance to refinance a mortgage in danger of default, or to work out payment arrangements if the mortgage weren’t too far into default.

These programs, available to home owners and investors alike, save homes from foreclosure and short sales by giving a struggling owner time to regroup and manage the mortgage better – at least in the short term. But because of the demand for this kind of help, a number of housing industry scams have stepped in to defraud homeowners in trouble with mortgage payments.

Mortgage relief scams top the list of the Federal Trade Commission’s most common complaints year after year and continue to flourish because of the housing collapse and its aftermath. Targeting those in foreclosure or on the brink, these scams turn up in the form of companies that promise to help struggling homeowners avoid foreclosure.

Many scam companies claim that they represent the lender who holds the mortgage, a government entity sponsoring the mortgage relief program. They might call themselves a law firm or credit-counseling bureau. Their pitch

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to homeowners claims that for a fee, they’ll take care of all the details involved in getting mortgages refinanced, payments reduced, or even a payment holiday granted. They may also tell homeowners to make mortgage payments directly to them, or that they’re collecting them on behalf o the lender.

One major red flag in schemes like this involves secrecy: scammers tell victims not to contact their lenders, or a lawyer, claiming that they’ll handle all aspects of the satiation themselves. They might also guarantee to get a loan modification for everyone, no questions asked. Then, they take the money from fees and mortgage payments and disappear.

The Federal Trade Commission (FTC) complies consumer information on avoiding scams, particularly real estate schemes. The FTC lists a number of warning signs for consumers to watch for, such as high pressure sales tactics that warn of dire consequences, extravagant guarantees to help every case, no matter the circumstances, and asking for upfront fees before any services are provided. (Top image:Flickr/rieh)

The American Monetary Association Team

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