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Paul Kiesel
Paul Kiesel
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Beware of Foreclosure Con Artists

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As the mortgage crisis envelopes more and more borrowers into a state of delinquency or foreclosure, it is only natural that we should see an influx of “Foreclosure Rescue” advertisements, however, con artists have found this a haven to swindle desperate homeowners out of their homes.

NPR and “All Things Considered” had a great segment on Monday explaining the intricacies of companies claiming that they can refinance troubled borrowers’ mortgages (when the bank won’t) and help keep them in their home, when in actuality they end up taking the equity out of these homes and eventually the borrower loses the home.

The scam works in that a borrower comes into the Foreclosure Rescue’s business under the impression they are refinancing a mortgage, but the crafty scam artists are actually taking possession of the home and will eventually take the equity out of the home. In the case that NPR draws upon, the borrower, thinking she was refinancing, had unknowingly transferred her home to what is called a “straw buyer,” a straw buyer being someone who pays off the mortgage, and then takes out a bigger, new mortgage, thus draining the equity of the home.

According to “All Things Considered,” “The straw buyers are an important part of the foreclosure rescue scam. They lend their identities and good credit to the operation and get a fee in return. The straw buyers never live in the house. Instead, the scammers ask homeowners to sign over the deed of their house for a year, while a ‘foreclosure consultant’ helps them repair their credit.” But the credit is never repaired and in cases like these it is difficult to undo the transaction as the people who get the cash out of the home are gone by the time all of this activity is reported to the authorities. Then the original borrower is stuck in a situation where there’s a huge mortgage and they’ve lost property rights.

The worst part is, the con artists aren’t like the grifters of “The Sting” or “Paper Moon,” most of them are former real estate professionals, according to FBI Assistant Director Mark Mershon. The reason for this probably lies in the fact that the con artists have to be savvy enough in real estate to understand the financial-geometry that’s taking place and how to sell the idea as being a practical one to the troubled borrower.

If you’re in the need of mortgage counseling or if you’re trying to prevent foreclosure, take caution when pursuing an alternative “Foreclosure Prevention” company. If all else fails, it’s wise to speak with an attorney who can help elucidate what rights you have as a homeowner and a borrower trying to make sense of a complicated situation.