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By Geoff Williams, FrontDoor.com | Published: 5/04/2009
You can pay a private foreclosure rescue company to help you, but there are no guarantees.
If a foreclosure rescue company or specialist makes a promise.
Foreclosure rescue, says Sichenzia, is "the most prevalent type of mortgage scam out there today. People, usually ex-mortgage brokers running boiler room type call centers, are taking $2,000 and $3,000 upfront fees from borrowers and promising to stop the borrowers' foreclosure or promising to get borrowers huge and unrealistic reductions in the principal indebtedness owing."
He stresses, "No legitimate foreclosure consultant would ever make these types of guarantees."
Of course, what makes things so complicated is that some of these companies that do ask for you to pay upfront are reputable companies. Donna Johnson, an Austin, Texas, public speaker who almost lost her house to foreclosure last year, saved her house by working with a third-party loss mitigation company, which restructured her loan as a loan modification.
"Our lender did more harm than good," recalls Johnson, "pressuring us into making arrangements that we could never keep. This company undid that mess for us."
That said, just because a third-party company is reputable, most experts nonetheless recommend working with your lender or a nonprofit agency like well-respected Homeownership Preservation Foundation. Because even if a third party makes no guarantees, there is no guarantee they can help, and you still may lose your house and be out a couple thousand dollars to the mitigation company that couldn't work out a deal.
Of course, it might sound crazy that so many people could get entrapped in a crooked financial snare that takes their money and possibly even their house, since so many of these red flags are, well, pretty red (and big) and obvious.
But while "it's easy to judge people when you're on the outside looking in, in all honesty, it's just not that black and white," says Johnson, who was on the receiving end of mailings and calls when she was in foreclosure and has made it one of her missions to educate homeowners about mortgage fraud.
"For those who purchased the house with the intentions of raising a family and being there long term, your stability is jeopardized in that moment," continues Johnson. "You feel as if you've failed and let your loved ones down. You're literally between a rock and a hard place, and all you want is for someone to be able to help you. And as a result, the more desperate you are, the more vulnerable you become."
And as the economy continues to be uncertain, this sort of crime isn't going away. "You know, you used to be able to rob a bank with a gun," says Sichenzia, "but if you got caught, you could end up doing five to 15 in the 'pen,' so to speak. Well, about eight years ago, cons figured out that you could rob a bank with a pen and paper and probably never get caught at all. Hopefully, that's about to change."
In the meantime, keep your guard up, and if you do lose your house to a con artist, Sichenzia reminds ex-homeowners that they can fight back. "These crimes leave a huge paper trail, and if pursued with vigor through law enforcement and civil litigation, you can get your house back. People just give up too damn easily."
Geoff Williams is a regular contributor to FrontDoor.com and often writes about personal finance.
NEXT: The Red Flags of Mortgage Fraud >>
