Foreclosure Avoidance and Mortgage Modification

Foreclosure and mortgage modification scams are truly among the most nefarious examples of how low scammers will stoop to target the most vulnerable among us.

All homeowners are potential victims of foreclosure and mortgage modification scams. That’s especially true if you’re in difficult financial straits. You may be desperate for assistance. Scammers know that. And so do governments. The website of the U.S. Department of the Treasury, for example, features a list of tips to help you avoid them.

The following are some of the more common tactics foreclosure and mortgage modification scams use to prey upon distressed homeowners.

You Can Lose Your Home to Foreclosure Scams

The operators of foreclosure and mortgage modification scams may operate an official-looking business. They watch and wait for upcoming foreclosures. They may find them one at a time, or in the event of a local or national financial or housing crisis they may come in a wave. In either case, the scammers descend upon the frightened homeowners and present them with a golden offer. In exchange for a retainer of a few thousand dollars, plus perhaps an additional monthly fee, their financial services professionals can restructure or refinance your mortgage. After receiving the money, however, they disappear. Or they wait an appropriate length of time before sending an official reply that your case was not winnable. But they’ll do so in a very professional manner and say that they’re sorry.

But not sorry enough to return the money, of course. Not even to stop the monthly membership payments. The fine print makes sure it’s all non-refundable, so you will wind up paying them every last cent. You lose the thousands of dollars that they scammed from you. Plus any monthly fee until you manage to pay it all off.  You still lose your house because they never did anything to help you. Moreover, since you trusted them you didn’t initiate a paper trail on your own behalf with the bank or mortgage company. After all, you thought you contracted with professionals who were working on your behalf. So you’ll never know if you could have avoided all that if they had never come into your life! Add to that the emotional stress, legal fees, and everything else. It adds up to a truly serious criminal endeavor.

Scamming the Government, the Courts and the Banks in Your Name

But it can get worse. The scammers can cheat the government, the courts, and the bank as well. And make it appear that you will be the one at fault. How? They’ll tell you that they can prevent your foreclosure if you sign over to them a fractional interest in your home. It may be as little as one percent or even one-eighth of a percent. At first glance that doesn’t seem to be much. A small price to pay to keep your home. So you agree to pay them a sum of money every month.

You expect that the home will not be foreclosed. But they’re just delaying the inevitable. They’ll play a game with you by filing one bankruptcy after another through shell companies. The bit of ownership you paid them to take enables them to do that. Eventually, it all comes crashing down and you’re left to pick up the pieces, minus your home.

Yet another version of foreclosure scams involves signing over the whole house to the scammer and agreeing to rent it from them as a way of slowly buying it back. Once they are in control, however, they can keep raising the rent until you’re forced to move out. Or they use the fine print to make it essentially impossible for you to buy it back.

Foreclosure and Mortgage Modification Scammers Can Be Caught

You’re finding it hard to keep up with your mortgage payments. Or you’re already being threatened with foreclosure. And then you saw a sympathetic ad in the newspaper, on TV or the social media about an attorney who can smooth things over with your lender. If you can’t trust an attorney, then who can you trust?

The lawyer was licensed in New York (and in neighboring Vermont), but it turned out that he was running a foreclosure and mortgage modification scam. One 70-year-old woman was paying him a monthly fee that she was led to believe was going to her mortgage provider, but it wasn’t. The lawyer pocketed it while doing virtually nothing to alleviate her situation. The case went on for five years before she received a settlement.

Because foreclosure and mortgage modification scams eventually implode, the many of their operators are eventually caught and punished.

For over two years beginning in January 2004, two California brothers had swindled $15 million from homeowners across the country facing foreclosure and eviction. Their front companies were known as Head Financial Services and Creative Loans. There were, however, no financial services and no loans, creative or otherwise. Many of their victims wound up losing their homes and became destitute instead. 

Since 2013, a high profile investigation in Texas has led to the arrest and conviction of 27 people who operated foreclosure and mortgage modification scams. Known as the Bankruptcy Fraud Initiative, the last of the scammers, who deceived at least 70 homeowners who were facing foreclosure, was sentenced to prison in September 2018.

In August 2016, a former California pastor pleaded guilty to scamming $3 million from homeowners hard hit by the Great Recession by offering them phony mortgage rescue services. He did so through a series of front companies, including Stay in Your Home Today, 21st Century Development, and Genesis Ventures Corporation. He was sentenced to four years in prison.

A Florida woman was found guilty in February 2020 of filing fraudulent bankruptcy petitions on behalf of homeowners who had defaulted on their mortgages. She profited but the holders of those mortgages, of course, did not.

In August 2020, two California men were sentenced to lengthy prison terms for having scammed 1,600 homeowners out of $3.5 million. The companies they ran — U.S. Homeowners Relief, Greenleaf Modify, Waypoint Law Group, and American Lending Review — advertised that they could assist homeowners to modify their mortgages, and claimed that they had a 97% success rate in doing so. They charged their clients an advance fee that varied between $1,450 and $4,200, which they pocketed without providing any services.

And in 2021, a Florida mortgage broker was charged with communications fraud for his alleged role in a mortgage loan modification and investment scheme that may have netted more than $1 million nationwide.

Entire Neighborhoods Can Fall Victim to Foreclosure and Mortgage Modification Scams

On the other side of foreclosure and mortgage modification scams are criminals who focus on neighborhoods containing lots of unoccupied foreclosed properties. They operate real estate scams. They forge documents to make themselves appear to own the homes, then hire property managers and find rental tenants. The scammers collect the rent but don’t pay the property managers. Eventually, the authorities catch on, but the conman is long gone. The renters will be evicted and the property managers are never paid. Given the economic hardship that resulted from the COVID-19 pandemic, which has affected many consumers, the U.S. Department of Housing and Urban Development has issued a warning to homeowners who find themselves in debt. They may be specifically targeted by any one of a series of foreclosure and mortgage modification scams. There are multiple reports that scammers claiming to represent the Federal Home Loan Mortgage Corporation (popularly known as Freddie Mac) are claiming that they can provide low interest rates. 

If you think you’ve been the victim of a foreclosure or mortgage modification scam, contact the fund recovery experts at MyChargeBack.