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How to Avoid Becoming a Victim of Mortgage Rescue Scams

January 3, 2011 10:29 am

RISMEDIA, January 3, 2011--For a homeowner facing the frightening threat of foreclosure, the offer seems too good to be true. A mortgage rescue company steps forward, claiming to be able to help you save your credit and your home.

In some cases, the mortgage rescue company provides phantom help offering to work as an intermediary with lenders, collecting an upfront fee for services it never provides or that homeowners easily could have done on their own for free. In other scams, the mortgage rescuer may offer to pay off the delinquent loan and allow homeowners to stay on as renters, with the possibility of buying the home back later. But the scam artist doesnt make the payments and homeowners, who have signed over their deed, end up losing the home and any equity they had in it.

"People who are facing foreclosure need to know there are reputable organizations and industry professionals who can help them turn things around," said Michael Golden, president of @properties. "A good rule of thumb to remember is if something sounds too good to be true, it probably is."

Beth Llewellyn, CEO of the Partnership for HomeOwnership, cautions homeowners facing possible foreclosure to be careful of scams, particularly in larger metropolitan areas.

"Every time theres a drop in the market, youre going to find all kinds of scam artists coming out of the woodwork," said Llewellyn, who also is a U.S. Housing and Urban Development (HUD)-certified homeownership counselor with over 12 years of experience helping lower-income families achieve homeownership.

Llewellyn suggests that homeowners who find themselves falling behind on their mortgage payments contact their mortgage lender immediately to see if the loan can be restructured or refinanced before they have been delinquent on their payments for three months and formal foreclosure proceedings have begun.

At-risk homeowners are encouraged to contact a HUD-certified housing counselor who can help walk them through their options. Reputable counselors can be found through the HUD website at www.hud.gov or by calling 1-800-569-4287. HUD-certified counselors also can be contacted through the Hope Now Alliance homeowner hotline at 1-888-995-HOPE (4673) or its website at www.hopenow.com.

Homeowners also might want to contact an attorney about their legal options or a local Realtor to get more information regarding fair market housing values.

Illinois instituted tougher guidelines on mortgage rescue companies with the Mortgage Rescue Fraud Act in 2007. The law requires that rescue companies give homeowners a written contract, which the homeowner can cancel at any time, listing the services they will perform before being paid. In the case of a home sale, a written contract also is required and the mortgage rescue company must pay the homeowner at least 82% of the fair market value if the rescue fails.

If homeowners believe they have been victims of a mortgage rescue scam, there are places they can turn, said Michael Golden.

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