Be Wary of Cement Blocks Disguised As Rescue Floats

In one of our previous blog posts, we wrote about the Hardest Hit program that helps people with temporary assistance to avoid foreclosure.  That post talks about keeping a bad day from getting worse, but today we are reporting about scams that do the opposite.  An article in the Chicago Tribune entitled “Foreclosure rescue scams add insult to injury” highlights the trouble a growing number of distressed homeowners are facing--foreclosure rescue scams.

Foreclosure activity continues to grow in Illinois at a rate higher than the rest of the county.  The three month period ending in September saw a 31 percent increase in foreclosure activity over the same period in 2011 according to the article.  The government is reaching out to homeowners not yet in foreclosure through various programs like the Hardest Hit program while at the same time scam artists are reaching out to the same segment of the population.

Types of Foreclosure Rescue Scams

Fraudsters implement a number of schemes to defraud property owners who are on the verge of foreclosure and are looking for a way out.  Loan Modification programs can in some instances be legitimate means for an individual to avoid foreclosure.  However, certain scams promise lower monthly payments as part of the loan modification agreement.  However they may also include stiff penalties for any late or missed payments, automatic payment increases after a certain period of time and other contractual provisions virtually assuring that the property owner will end up right back in default.  Lease-buyback plans give the owner the right to lease their home from the new holder of the title.  The lease payments are supposed to count towards what will hopefully be the eventual buyback.  These plans may include high lease payments that individuals are not able to pay as well as high buyback prices that the owner cannot afford thus losing the property after all.  Renegotiating Consulting Services offer to help individuals renegotiate their current loan for a fee.  Be wary of the consulting firms who demand partial payment upfront.  Individuals reported forking over fees to these “firms” and then never hearing from them again.  In some instances, the firms instructed the individuals to stop making any payments until they heard back from the consulting firm so by the time the property owner realizes they have been scammed, they are even deeper into default.        

How Prevalent are these Foreclosure Rescue Scams?

According to the article in the Tribune, if the national rate of reported suspicious activity continues for the rest of the year at the pace it did during the first half of 2012, the total 2012 rate could be up 70 percent from 2011.  As the housing market lags in various parts of the country, real estate brokers, lending institutions and other financial services involved in real estate transactions look for new ways to make a profit.  Unfortunately a number of the individuals at these businesses find that property owners on the doorstep of foreclosure are desperate for help and tend to drop their guard when the possibility of a rescue comes up.  This situation is primed for fraud.  The sophisticated fraudsters hide the fee increases and triggers for automatic foreclosure deep in the language of the contracts thus bolstering their position that they are not breaking the law.  This reemphasizes the need for an experienced real estate attorney who will be able to effectively explain the pros and cons of signing on to a loan modification or consulting contract.

The silver lining to this news is that the increase in reports is due in part to a heightened awareness of these schemes by the public.  Property owners also see other people being scammed and are thus less embarrassed to report their own misfortune.  Groups investigating the fraudulent scams have more evidence to work with and can effectively spot and stop new scams based on their knowledge of previous schemes.

There are signs of improvement in the housing market, but foreclosure rescue scams continue to keep many property owners in the depths of foreclosure.  If you suspect that you may be caught up in one of these schemes, do not hesitate to contact our office in Oak Park to avoid additional financial harm.