When fighting foreclosure, watch out for mortgage scams
More than 3,800 homeowners filed residential mortgage complaints with the Illinois Attorney General's Office in 2010, ranking it among the top 10 of consumer concerns in the state.
Homeowners at risk of losing their home may be a target for businesses seeking to profit from the misfortune, the AG's office warns.
There are typically two businesses that try to con people out of the few assets they have left: mortgage rescue consultants and mortgage rescuers.
Mortgage rescuers often offer to buy the home for a small fraction of its actual value while offering the ability to stay in the home as a renter with the option of buying the home back eventually.
"As tempting as this deal may seem, it is a recipe for a ripoff," the AG's office said.
The "rescued" homeowners may be expected to make monthly rental payments that cost the same or more than their former mortgage payments. When they fall behind, the new owners can ask a court to have the old owners evicted.
In the second instance, mortgage rescue consultants promise to buy time – for a fee – and negotiate with creditors.
"All too often ... 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," according to the AG's office.
Some tips from the Better Business Bureau to avoid scams include:
• Legitimate lenders never "guarantee" to get you a loan or credit card before you apply, especially if you have bad credit, no credit, or have declared bankruptcy in the past.
• Legitimate lenders never ask for you to pay for processing an application. One exception is real estate; it is accepted and normal practice for lenders to request payment for a credit report or appraisal.
• Never give a credit card number, bank account information, or a Social Security number out over the phone or Internet unless you know with whom you are doing business. If you do not have the offer confirmed in writing or in hand and are asked to pay, do not do it.
• If you cannot obtain money or credit from conventional, local sources such as banks or credit unions, it is unlikely that a classified advertisement, telemarketer or 800 number from a non-local business can provide you a legitimate offer.