Scams Multiplying as Foreclosure Crisis Endures

5 August 2008

Author: admin Posted under Foreclosure Crisis

It is not enough that all government officials of this country are worried about the millions of homeowners facing foreclosure. It would seem that the foreclosure crisis has also brought with it numerous incidence of scam perpetrated by con artists who see these distressed borrowers as easy target.

Scams Multiplying as Foreclosure Crisis Endures

According to the Federal Bureau of Investigation, the problem with these foreclosure scams is likely to escalate and could even become as huge as the mortgage frauds, which started this mess in the first place.

Most of the foreclosure scams involve con artists promising to negotiate with the lender in behalf of the troubled borrower for a certain fee. The poor homeowner, hoping to avoid a nasty foreclosure proceeding, pays the money. Of course, the homeowner never sees the person again.

There is also another scam that is growing popular among these con artists. They convince the owner to transfer title of the property to a foreclosure rescue company, which will continue to make the mortgage payment. The homeowner will be able to continue to live at home but as renters. The scammers then sell the house or borrow against it, leaving the original homeowner with more problems when they finally run.

Because of this, there are already fourteen states that decided to pass legislation in order to protect these troubled homeowners from falling victim to these foreclosure scam operations. These states include Iowa, Florida and Washington.

Among the legislation passed include the following:

Foreclosure rescue companies are prohibited from charging upfront fees.
Foreclosure rescue companies are required to enter a written agreement that includes a provision that allows the homeowner to cancel the agreement.
Foreclosure rescue companies should allow distressed homeowners to back out of the written contract within five days. If the company was able to sell within this period, the original homeowner is entitled to 82 percent of the home equity.