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How To Avoid Scams

The OCC lists the following Ten Warning Signs of a Mortgage Modification Scam.

“Pay us $1,000, and we’ll save your home. Some legitimate housing counselors may charge small fees, but fees that amount to thousands of dollars are likely a sign of potential fraud— especially if they are charged up-front, before the ‘counselor’ has done any work for you.”

“I guarantee I will save your home— trust me. Beware of guarantees that a person or company can stop foreclosure and allow you to remain in your house.”

“Sign over your home, and we’ll let you stay in it. Be very suspicious if someone offers to pay your mortgage and rent your home back to you in exchange for transferring title to your home.”

“Stop paying your mortgage. Do not trust anyone who tells you to stop making payments to your lender and servicer, even if that person says it will be done for you.”

“If your lender calls, don’t talk to them. Your lender should be your first point of contact for negotiating a repayment plan, modification, or short sale.”

“Your lender never had the legal authority to make a loan. Do not listen to anyone who claims that ‘secret laws’ or ‘secret information’ will be used to eliminate your debt and have your mortgage contract declared invalid.”

“Just sign this now; we’ll fill in the blanks later. Take the time to read and understand anything you sign.”

“Call 1-800-Fed-Loan. This may be a scam. Some companies trick borrowers into believing that they are affiliated with or are approved by the government or tell you that you must pay them high fees to qualify for government loan modification programs.”

“File for bankruptcy and keep your home. Filing bankruptcy only temporarily stops foreclosure. If your mortgage payments are not made, the bankruptcy court will eventually allow your lender to foreclose on your home. Be aware that some scammers will file bankruptcy in your name, without your knowledge, to temporarily stop foreclosure and make it seem as though they have negotiated a new payment agreement with your lender.”

“Why haven’t you replied to our offer? Do you want to live on the streets? High-pressure tactics signal trouble. If someone continually contacts you and pressures you to work with them to stop foreclosure, do not work with that person. Legitimate housing counselors do not conduct business that way.”

Fraud Prevention and Your Safety
You should be aware of foreclosure scams when seeking assistance with a short sale or other option to avoid foreclosure. Be sure to follow some basic rules to avoid scams:
  • DO NOT sign documents you do not fully understand.
  • DO NOT sign any documents you feel pressured into signing. Legitimate companies will allow you time to review your options, as well as any documents that are needed.
  • DO NOT sign over your deed without the completion of a sales contract or other closing.
  • DO NOT make mortgage payments to anyone other than your mortgage lender.
  • DO NOT pay any amount of up-front fees to anyone who claims to stop foreclosure.
  • Be sure to seek the advice of an attorney with questions regarding legal matters.
OCC Consumer Tips and Common Scams
The United States Office of the Comptroller of the Currency, Administrator of National Banks warns of scams related to mortgage modification and foreclosure advoidance, and gives the following examples:
  • “Foreclosure ‘rescue’ and refinance fraud. The scam artist offers to act as an intermediary between you and your lender to negotiate a repayment plan or loan modification and may even “guarantee” to save your home from foreclosure. You may be told to make mortgage payments to the scammer directly – along with significant, up-front fees – and be told that the scammer will forward the payments to your lender. In reality, the scammer may pocket your money and leave you in worse shape on your loan. The scam artist also may tell you to stop making payments or stop communicating with your lender. Don’t follow that advice.”
  • “Fake ‘government’ modification programs. Unscrupulous people may claim to be affiliated with, or approved by, the government or may ask you to pay high up-front fees to qualify for government mortgage modification programs. While government-supported mortgage modification and refinancing initiatives are legitimate, the scam artists’ claims are not. Keep in mind that you do not have to pay to benefit from these government programs. All you need to do is contact your lender or loan servicer.”
  • “Leaseback/rent-to-buy schemes. In this type of scam, you are asked to transfer the title to your home to the scammer, who will, supposedly, obtain new and better financing and/or allow you to remain in the home as a renter and eventually buy it back. If you do not comply with the terms of the rent-to-buy agreement, you will lose your money and face eviction. The agreement may be very hard to comply with, because it may require, for instance, high up-front and monthly payments that you may not be able to afford. In fact, the scammers may have no intention of ever selling the home back to you. They simply want your home and your money.”
  • “Bankruptcy scams. You may have heard that filing bankruptcy will stop a foreclosure. This is true – but only temporarily. Filing bankruptcy brings an “automatic stay” into effect that stops any collection and foreclosure while the bankruptcy court administers the case. Eventually, you must start paying your mortgage lender, or the lender will be able to foreclose. Bankruptcy is rarely, if ever, a permanent solution to prevent foreclosure. In addition, bankruptcy will negatively impact your credit score and will remain on your credit report for 10 years.”
  • “Debt-elimination schemes. Scammers may claim to be able to ‘eliminate’ your debt by making illegitimate legal arguments that you are not obligated to pay back your mortgage. These scammers will provide you with inaccurate claims about applicable laws and finance, such as that ‘secret laws’ can be used to eliminate debt or that banks do not have the authority to lend money. Do not stop making payments on your mortgage based on their claims.”

You can review the entire OCC document by downloading this printer-friendly PDF:

Freddie Mac offers additional information on Mortgage Fraud Schemes: