Foreclosure Rescues: Lifelines or Frauds?

The real estate industry has been affected by a wide sweep of foreclosures in recent times. Research has shown that the number of foreclosure filings in the nation has increased as much as 87% since this time last year.

With the foreclosures increasing at such an alarming pace, those in distress are naturally looking for ways through which they can save the roof above their heads. This has led to a whole new set of real estate scams and frauds aimed at duping the susceptible homeowner.

Many homeowners are desperate to save their property from being repossessed by the lenders and will do almost anything to get themselves out of the debt trap they find themselves in. Unscrupulous con artists and fraudulent companies are taking advantage of this and making hay while the sun shines. The rate at which these scams are spreading is causing widespread alarm in the real estate world.

The scams take varied forms. Many involve an individual or a company claiming that it will help homeowners facing foreclosures with offers of refinancing. Willing to grasp at every straw homeowners take up the offers without asking too many questions. They transfer their homes to the “re-financer”, who then proceeds to strip it of its equity. Thus instead of getting relief, at the end of the day homeowners find that they have lost even the little that they had left.

One company claimed that it had stopped over 250 foreclosures and had refinanced many thousands of homes. However when investigators visited their office they found that the company had shut down! A major class action suit was brought against the company, the Metropolitan Money Store and it was accused of cheating over 400 homeowners.

CBS News undertook an investigation into some of these scams. It found that there are more than 1100 cases dealing with foreclosure scams pending with the FBI at present. It is significant that just a few years ago in 2003, there were just 436 cases pending.

The service through which offer are made to foreclosure victims promising relief and a way to save their home is usually referred to as “foreclosure rescue”. Scammers have been able to take advantage of this because there are few monitoring regulations attached to this service. Foreclosure rescues are monitored in only seven states. In only one, Massachusetts is it considered illegal.

The National Consumer Law Centre has termed this phenomenon one of the most outrageous in the United States.

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