Thursday, Oct 16, 2008 at 5:16 PM (Public Entry)

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Facing Foreclosure? Beware the “Rescue” Scam!

If you are a homeowner at risk of losing your home due to foreclosure or unpaid property taxes, you may be a target for businesses seeking to profit from your misfortune. Many of these business may try to exploit your emotional vulnerability in order to con you out of the few assets you have left.

Two such businesses carry a high potential for fraud and abuse: mortgage rescue consultants and mortgage rescuers. The following information explains how these schemes work and why they are risky. You also will find an explanation of your rights under the Mortgage Rescue Fraud Act, a law that Attorney General Madigan sponsored to protect our homes and neighborhoods from the scourge of mortgage rescue fraud.

How the Rescue Schemes Work

Mortgage Rescue Consultants

For a hefty fee, mortgage rescue consultants promise to "buy you time" and possibly save your home by negotiating deals with your creditors. They may also offer to help you repair your credit and refinance your existing mortgage. These services may sound like something you really need, but the truth is they all can be performed better by a licensed attorney, a reputable non-profit housing counselor, or you. All too often, mortgage rescue consultants offer homeowners phantom help. They either do nothing they promised to do, or they do the bare minimum, perhaps placing a phone call to the homeowner's bank or mailing the homeowner a list of refinancing sources they found on the Internet. Meanwhile, the homeowner wastes valuable time that could be spent really trying to save the home.

Mortgage Rescuers

If you are on the verge of losing your home but have built up equity in the property, you are a prime target for so-called “mortgage rescuers.” Typically, mortgage rescuers will promise to “save your home” by offering you a three-part deal:

The rescuer (or a third party investor) buys your home from you for a small fraction of its actual value.

You stay in the home as a renter.

You get to buy back the home when you're back on your feet financially.

As tempting as this deal may seem, it is a recipe for a rip-off. “Rescued” homeowners often find themselves struggling to make monthly rent payments that are comparable to or even higher than their former mortgage payments. When the homeowners fall behind in rent, the new owners ask a court to evict them. In the worst cases, the homeowners do not even realize they have sold their home until they receive the eviction papers. Even homeowners who keep up with their rent payments are often unable to buy back the home when their lease expires.
Whether they’re evicted or move out voluntarily, homeowners lose both their home and their equity in these schemes. The only people who win are the rescuers and their investors, who end up reaping huge profits on homes for which they paid very little.

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