If you’re having trouble making your mortgage payment and fear losing your home, don’t grab the first financial life preserver that’s thrown your way.

It may sink you financially and cause you to actually lose your home.

Homeowners facing foreclosure are sitting ducks for scammers who tell consumers they can save their home but often push them into more of a financial quagmire.

While they’ve yet to see a surge of cases, officials and consumer advocates say they’re concerned that homeowners facing the loss of their home will be vulnerable to so-called foreclosure rescue scams.

“Lenders are telling us, and the foreclosure people are telling us, that one of the big issues is that borrowers get into difficulty and they don’t communicate and respond to the lender at the point in time when the lender can have some [foreclosure-prevention] programs available,” said John Fleming, general counsel for the Texas Department of Savings and Mortgage Lending. “It makes them vulnerable to being scammed by some of these foreclosure rescue people.”

The number of U.S. homes facing foreclosure surged 58 percent in the first six months of the year, the latest sign of growing problems in the mortgage industry, according to RealtyTrac Inc., a data firm. And Texas is among the states with the highest number of homes receiving foreclosure notices, the company said.

Elizabeth Renuart, an attorney with the National Consumer Law Center in Boston, said scammers pick on people who have equity in their homes, “and they’re going to basically steal your equity in the guise of saving your house.”

“That’s the lie,” she said. “They say, ‘I will help you save your home’ when that’s not the case.”

One common scam – “and it’s a great concern to us” – is that consumers will wind up selling their home to a third-party rescuer believing that they’ve merely refinanced their loan, Mr. Fleming said.

A variation of the scam is the “bailout that never quite works,” according to a 2005 report on foreclosure rescue scams by the National Consumer Law Center.

“This scenario includes various schemes under which the homeowner surrenders title to the house in the belief that he is entering a deal where he’ll be able to remain as a renter and buy it back over the next few years,” the report said. “Homeowners are sometimes told that surrendering title is necessary so that someone with a better credit rating can secure new financing to prevent the loss of the home.

“But the terms of these deals are almost invariably so onerous that the buyback becomes impossible, the homeowner permanently loses possession, and the ‘rescuers’ walk off with all or most of the home’s equity.”

The third type of scam is a bait-and-switch in which homeowners don’t realize they are surrendering ownership of the house in exchange for a “rescue.” Many homeowners later insist that they believed they were only signing documents for a new loan to make the mortgage current, according to the consumer law center.

The best way to protect yourself from these scams is to contact your lender as soon as you realize you’re going to have trouble paying your mortgage. They would much rather help you keep your home than to repossess it and have to deal with the accompanying expenses of preparing the home for sale.

“The lender’s the key,” said Bill Nazur, a mortgage broker in Newport Beach, Calif., and co-author of Finding Foreclosures: An Insider’s Guide to Cashing In on This Hidden Market. “They’re the only one that has authority to help the consumer.”

But you have to get to them early.

Experts say to be wary of people contacting you out of the blue offering to save your home.

“They will literally mail letters to the home or they will knock on the door and say, ‘This is the information we have in public records,’ ” Mr. Nazur said. “The universal hook is they’re tying into the emotion – ‘We’re here to help you’ – and they know enough information to make them dangerous.”

Among their insider knowledge:

“They know how far behind you are; they know who the lenders are because that’s public record,” Mr. Nazur said. “They know when you took out that mortgage, and they know the interest rate at which you took out the mortgage.”

Craig Jarrell, president of the Dallas region of Pulaski Mortgage Co., said consumers also should be wary of people offering to buy their home to save it from foreclosure.

“Until you go to a title company and have a real closing where your loan is really paid off with certified funds and you get a release of lien, anything else is a scam,” he said.

Anyone who thinks they’ve been a victim of a scam can file a complaint with the Texas attorney general’s office by calling 1-800-252-8011 or going online at www.oag.state.tx.us.

“We encourage consumers to file a complaint with our office or online,” said Paco Felici, spokesman for Attorney General Greg Abbott. “Whether they lost money or their home to one of these scams, or even if they receive mail solicitations that are dubious, we’d very much like to know.”

The president of one Dallas foreclosure prevention company says many consumers have benefited from his services.

“You have bad apples in every industry,” said Randall Dunn, president of DFW Stop Foreclosure. “We do help a lot of people, and that’s the bottom line.”

His company has a “satisfactory” record with the Better Business Bureau of Metropolitan Dallas, meaning that the company has been in business for at least a year and has “properly addressed matters referred by the bureau.”

“The bureau understands and has no concerns about the company’s products, services and type of business,” the organization said in its report on DFW Stop Foreclosure.

The company says on its Web site that it works with lenders “to stop harassing phone calls” and will work with financial institutions to arrange payment plans for back payments owed on a mortgage.

“You will never pay a dime to DFW Stop Foreclosure until we arrive at a mutually agreed upon solution,” the company says.

It also will buy a homeowner’s home to save it from foreclosure.

Mr. Dunn said consumers need to carefully scrutinize those who approach them about buying their home to save it from foreclosure.

“You’ve got talk to the people and get a good feel for them,” he said. “How long have you been doing this? Do you have any references? Are you registered with the Better Business Bureau?”

All terms need to be clearly spelled out, Mr. Dunn said.

“They have to agree to terms that are doable for themselves,” he said.

Read everything before you sign and get all promises in writing.

“Some schemers will offer to complete paperwork for you, or ask you to sign a stack of documents, supposedly to secure a new mortgage,” according to the Better Business Bureau. “Victims later learn that they signed a quitclaim deed to their home,” which transfers or “quits” any interest in real property.

Never sign a contract under pressure and never sign away ownership of your property.

“Signing over your deed to someone else does not necessarily relieve you of your obligation on your loan,” the bureau said. “Ask a trusted family member, your attorney or a financial professional to review any paperwork you are asked to sign.”

Finally, beware of a foreclosure rescue company that tells you not to contact your mortgage lender.

“Your mortgage company is the very business that you should be in touch with,” the bureau said.

Source:

http://www.dallasnews.com/sharedcontent/dws/classifieds/news/homecenter/realestate/stories/class080607dnbusperfi.9cd2c1f.html