Did you know that many so-called ‘mortgage relief programs’ are actually ‘mortgage relief’ scams?
Keeping up with mortgage payments can be tough, especially when faced with job loss, illness, or injury. If you are having trouble paying your mortgage, here’s what you need to know to avoid being scammed.
If the idea of losing your home is scary, you’re not alone.
Many homeowners find themselves unable to make their mortgage payments – a serious situation that can lead to foreclosure, the loss of any equity they’ve built up in their home, and the very real possibility that they may become homeless. This where mortgage relief programs come into play. These programs provide special help to reduce your mortgage payments so that you can stay in your home. The program usually focuses around either refinancing or modifying your home loan.
This sounds like a wonderful service if you are having trouble making your mortgage payments, but you need to watch out for scammers who may try to take advantage of your unfortunate situation.
Beware of Mortgage Relief Scammers
Unfortunately, a growing number of scammers have been taking advantage of homeowners who are desperate to save their homes. These mortgage relief scam operators promise to help distressed homeowners avoid foreclosure, but they rarely deliver on these empty promises.
While it’s hard to know how many scammers are out there, according to the Federal Trade Commission (FTC), more than 35 cases have been filed “against marketers of mortgage relief services” recently. The FTC also reports partnering with state law enforcement agencies to prosecute “hundreds more.”
How To Spot Mortgage Relief Scams
Recognizing a mortgage relief scam isn’t easy – after all, these fraudsters are usually professional con-artists – they’re good at what they do!
Top Tell-Tale Signs of Mortgage Relief Scams
- Demands for money up-front. Under The FTC Mortgage Assistance Relief Services Rule (MARS), it is illegal for companies or individuals to charge fees in advance for services like working with your lender to change, reduce your mortgage payments, or reverse foreclosure rulings.
- Big Promises and ‘Money-Back’ Guarantees. Legitimate mortgage counseling agencies approved by the U.S. Department of Housing and Urban Development (HUD) will never make any claims about what will happen with your home.
- A Company That Wants You To Send Them Your Mortgage Payments. Never send a mortgage payment to anyone other than your mortgage lender.
- You’re Pressured To Sign Over Your Deed. Some scammers are using this tactic to ‘have their cake and eat it too’ – the homeowner is still liable for their mortgage, even though they gave away their home.
- You’re Told Not To Contact Your Mortgage Lender Directly. This tactic is used to make homeowners fearful of their lenders, when in fact, the first thing distressed homeowners should do is start a conversation with their bank and/or a HUD-approved counselor.
- Rent-to-Buy. the con artist convinces the homeowner to surrender the title to their home and continue living there as a renter – all with the promise that the homeowner can buy their home back in the future. The problem is, the new owners tend to price the house well beyond what the former homeowner can afford – in the end, the distressed homeowner still loses their home, and all the equity in it.
- You’re Ask To Sign Papers You Don’t Really Understand. It’s easy for scammers to ‘bury’ documents that can lead to the outright loss of your home in stacks of official-looking papers they ask you to sign.
Ethnic Groups Being Targeted
One of the most recent scams involving mortgage relief has targeted “Spanish-speaking homeowners in Southern California.”
The FTC reports that two law firms hatched a complicated scheme designed to trick distressed homeowners to join fake lawsuits against banks and mortgage lenders. These con artists even hired Spanish-speaking salespeople to lure Hispanic homeowners into paying illegal, upfront legal fees – fees that were supposed to help the victims avoid foreclosure, eliminate their mortgages, or even win lawsuits against their lenders.
Sadly, none of the victims ever got the help they wanted, and many ended up further in debt.
Remember, if it seems fishy to you, trust your instincts and walk away.
How To Get Real, Legitimate Mortgage Relief Assistance
The good news is, there are a number of legal, no-cost options available to homeowners who need mortgage relief assistance.
If you, or someone you know, needs help dealing with their mortgage payments, it’s important to contact the mortgage lender right away. This isn’t a problem that will go away, and ignoring late payment notices will only make the outcome worse.
You can also speak to a credit counselor at any HUD-approved housing agency – there’s no fee for their services, and they can help you understand all of your options.
The FTC recommends that homeowners contact the Homeownership Preservation Foundation (HPF), a nationwide non-profit organization that operates a free, confidential foreclosure prevention hotline (888-995-HOPE) 24 hours a day, 365 days a year. Service from HPF housing counselors is available in more than 170 languages, and since 2004, they’ve helped over 8 million Americans learn about legitimate mortgage relief programs, grants, and laws.
And if you think you’ve been a victim of one of these mortgage relief scams, you can contact your State Attorney General’s office, the local Better Business Bureau, and/or the Federal Trade Commission.
Mortgage Relief or Mortgage Protection – What’s The Difference?
Another thing that can cause confusion among distressed homeowners is the difference between mortgage relief and mortgage protection – contrary to popular belief, they aren’t the same thing.
Mortgage relief means renegotiating the terms of an existing mortgage to lower interest rates, achieve a lower payment, reduce the total amount owing on the mortgage, or avoid foreclosure and/or bankruptcy.
By comparison, mortgage protection refers to a form of life insurance that covers mortgage payments if the homeowner is unable to keep up with their home loan due to injury or illness, and if the homeowner passes away, mortgage protection insurance (MPI) usually includes a death benefit that pays the mortgage in full.
If you are having trouble with your mortgage payments, definitely get help, but make sure to watch out for those scammers!
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This information is provided for general consumer educational purposes only and is not intended to provide legal, tax or investment advice.