Avoiding Foreclosure Assistance Scams
Even though the economy is finally starting to (slowly) turn around, there are still a record number of homes in foreclosure. With the number of foreclosures, there has been an increase in companies offering to help homeowners avoid foreclosure.
If you are having difficulty making your mortgage payments, there is a very good chance that you will be targeted by one of these companies. And while there are undoubtedly a few legitimate companies that really want to help, there are also a lot of scams that could cost you thousands of dollars, and still not save your home.
These companies offer to work with your lender and negotiate better terms and get your home out of foreclosure. One of the first things a dishonest company will ask for is upfront payment—that should be the first red flag. You shouldn’t have to pay until after your home has been saved. You should also refuse to work with any company that asks you to stop making payments on your mortgage. Falling further behind on your payments is never part of a legitimate plan to get out of foreclosure.
Several of these scammer companies have already been shut down, and there are several more that the US government is currently investigating. Unfortunately, by the time the government gets involved, most of the money gathered from the company’s victims is long gone. The best way to protect yourself, and stay out of foreclosure, is to contact your lender on your own.
If you have lost your job, or if you are having difficulty making payments, you need to call your lender right away, before you’ve missed a payment. Your lender may be able to renegotiate your terms to temporarily lower your payments. If you qualify for refinancing (taking out a second loan, with better rates, to pay off your mortgage), that may be another option to pursue.
If there is no way that you will be able to keep the home, sell before you fall behind on your payments. You may need to downgrade to a less expensive home, or switch to living in an apartment until you get back on your feet. If you can’t sell your home for more than you currently owe on it, talk to your lender about the possibility of a short sale. Many lenders, especially in a time when so many homes are already in foreclosure, are willing to work out short sale terms to avoid going through an unpleasant, and expensive, foreclosure.
The worst thing that you can do is to miss payments. Although a short sale will impact your credit score, as will a foreclosure, the missed payments leading up to a foreclosure often cause most of the damage. If you know you are not going to be able to afford payments, don’t let pride get in the way of asking for help. Lenders would rather work with you to prevent a short sale or foreclosure than have to put the time and effort into foreclosing on your property a few months from now.