Foreclosure Fraud

How to Protect Yourself from Foreclosure Frauds and Scams

Who are the Victims of Foreclosure Scams?

There are many reasons why people fall behind on their mortgage payments and end up facing foreclosure. And from this large pool of homeowners facing foreclosure, many become the targets of foreclosure scam artists.

If a family loses their home in foreclosure, it is easy for most people to assume that they must have been irresponsible with the loan payments or they bought a home that they couldn’t afford to begin with. The fact is - foreclosure can happen to anyone and for a variety of reasons! Another fact is – foreclosure scam artists love to know the reason why you are behind on house payments because it assists them in determining which type of foreclosure fraud will work best on you.

The truth is there are many reasons why people lose their home and many times it is out of their control. Homeowners who have defaulted on a loan could have suffered from any of many life changing events, such as the following:

Illness - Illness makes it impossible to work and most people when they don't work, they don't make money. Most people do not have adequate health insurance, which makes matters worse. When you are ill and your expenses continue your troubles mount. Quite often, doctor, hospital, prescription drugs and the cost of treatment can eat up a person's life's savings leaving them with no money to pay the mortgage.   People that are sick, elderly or frail are the easiest prey for foreclosure rip-off artists.

Divorce - Divorce causes enormous physical, emotional and financial stress. Money problems are a common cause of divorce and when you throw mortgage payments into the mix it gets even worse. Foreclosure fraudsters love divorce situations because they can play one (ex)spouse against the other and keep their tactics hidden easier.

Loss of Job – Job loss or a reduction in pay is a huge factor in why people can’t make their mortgage payments. This is why financial advisors tell us to have at least six months of living expenses in savings at all times. However, this is pretty tough for most of us to do as we are living paycheck to paycheck to begin with.

Money Management - Our educational system fails in a very critical area and that is the area of money management. Poor money management by the majority of homeowners and poor decision making causes a hopeless spiral of debt that may force you into foreclosure. I have been in the homes of many people facing foreclosure and it amazes me when I see a brand new car in their driveway and the big screen plasma TV in their living room. That is not good money management!

Death of a Spouse - The death of a spouse may cause the living spouse to shut down emotionally or the death of the bread winner may cause financial hardship.

Mortgage Abuses - Many foreclosures can be linked to loose lending requirements, risky loans, and exotic mortgage instruments. For instance, many lower-income homebuyers obtained adjustable rate mortgages (ARM) instead of fixed-rate mortgages to buy a house. ARMS have lower initial interest rates than fixed mortgages which allowed buyers to qualify for a larger loan. But adjustable rates can sometimes double from one year to the next, resulting in homeowners unprepared to meet the higher payments. Mortgage lending abuses have saddled families of all income levels with home mortgages they cannot afford.

Credit Cards - One of the reasons people go into foreclosure is because their other credit payments increase dramatically. People pay their credit cards late so they won’t be late on their mortgage payment. So when something bad happens such as a loss of job, pay reduction or other financial disaster it's the cards that go late first. And guess what happens then. All of a suddenly those monthly payments go sky high, increasing debt ratios along with the likelihood of foreclosure. Maybe it's the sudden increase in consumer payments that start the foreclosure process altogether. Maybe it's not the lender's fault. Perhaps it's those damnable credit card companies who start the downward spiral for homeowners with their exorbitant interest rates. The only difference between credit card companies and foreclosure scammers is that the credit card companies steal money legally.

Rising Property Taxes - Rising appraisals and property tax rates are often blamed for the recent increase in the number of foreclosures in some parts of the country. In states with rapidly increasing home prices the property taxes on their homes also rises fast, and usually faster than their income rises. Property taxes are especially hard on the elderly that are living on fixed incomes. It’s a shame that our state and local governments are so greedy that they force people out of their homes by slapping them with higher and higher property taxes, year after year. Then these holier than now politicians cry about the foreclosure fraudsters taking advantage of the elderly people that they themselves helped to drive from their homes.

Age - An increasing number of older Americans are now “aging into debt” which can lead to foreclosure. The elderly generally go into debt because they have to pay for groceries, prescription drugs, major home repairs and other necessities. Seniors are thus experiencing problems with paying their mortgages and other types of debts such as credit cards. Because elderly people are usually on a very limited, fixed income, once the debt spiral starts it gets worse.

Home Appreciation - Higher home values have lead some home owners into creative financing deals, but then, as interest rates rise, as is the case with adjustable rate mortgages (ARMS) the loans become too expensive. In addition, appreciating home values have given more and more owners equity to tap into and get cash for expenditures they may not have otherwise considered. Then they find out later they can't afford the payments and end up in foreclosure.

Believe it or not, there are others besides homeowners that become victims when foreclosure fraud occurs.

Bankruptcy System - Foreclosure scams that convince homeowners to file bankruptcy claim many homeowners as victims, but the one that suffers great harm is the bankruptcy system. Nationwide, foreclosure scams are causing an inappropriate filing of thousands of bankruptcy cases, including cases filed without the homeowner’s knowledge, cases knowingly filed by homeowners seeking only to benefit by postponing foreclosure, and cases voluntarily filed by home owners after being strung along by scam perpetrators.

Lenders - Lenders also suffer from foreclosure scams, receiving no payments for months or years while the repeated transfers and bankruptcy filings delay foreclosure. When a bankruptcy case involves a federally insured mortgage loan, such as a Veterans Affairs or Federal Housing Administration loan, the government is the ultimate victim of bankruptcy fraud because it must cover the mortgagee's loss.

As you can see, there are many reasons why people lose their homes to foreclosures and many people in this situation are targeted by foreclosure fraud artists. If you are facing any of these situations we recommend you get help earlier rather than wait until it’s too late. The longer you wait, the more distressed you will become, and the more likely you will become a victim of the “foreclosure rescuers”.