Loan Modification Scams to Think About!

Because loan modifications are changing every day it’s important you are aware of common scams.

Rent-to-Own / Leaseback Scam

In this scheme, the scammer urges you to surrender the title or deed of your home to them so that they can secure new financing because of their better credit rating. As part of this deal, you will be allowed to stay in your home as a renter and have the option of buying your home back in a few years. The terms of these deals usually make it impossible to buy back your home and the scammer may have no intention of ever selling back the home. And even worse, when the new borrower defaults on the loan you can be evicted.

Variations of the Rent-to-Own / Leaseback Scam:

Variation scam #1

The scammer raises the price of rent over time, eventually to an amount you can’t afford. After being unable to pay several rent payments, you are evicted. The “rescuer” is then free to sell your house.

Variation scam #2

The scammer offers to find someone to buy a home if you sign over the deed to and move out of the house. They promise to pay you some of the profit when they later sell the home. The scammer then rents out your home, keeping the profits while your lender proceeds with a foreclosure. You not only lose your home but you are still responsible for the unpaid mortgage. Transferring the deed does not change the mortgage obligation you have.

Short Sale Scam

Scammers posing as “short sale negotiators” or “short sale processors,” promise to expedite a short sale on your house, often misrepresenting the value of the home to the lender. They usually ask you to pay a fee upfront. This is illegal in many states. Scammers may even tack on surcharges or hidden fees before the close of the transaction. This is also illegal in many states.

A short sale can be a legitimate option for a homeowner facing default or for a homeowner who is current on their payments, but the value of the home has decreased. But the lender must agree to the short sale.  Homeowners considering short sales should only work with licensed real estate professionals or attorneys.  The law requires that the person negotiating the short sale with the lender be properly licensed. To protect themselves homeowners should verify licenses with their state licensing agencies.