Foreclosure rescue and Foreclosure Options
Below is a MRR and PLR article in category Finance -> subcategory Real Estate.
Understanding Foreclosure Rescue and Options
Foreclosure rescue, also known as equity skimming or stripping, involves predatory real estate practices targeting vulnerable homeowners facing foreclosure in the U.S. These scams primarily prey on low-income, uninformed homeowners.
What is Foreclosure Rescue?
Foreclosure rescue scams often involve subprime refinancing with excessive fees that strip a home’s equity. Although not always considered predatory lending, they're closely related. Subprime loans targeting unsophisticated homeowners can lead to foreclosure, making these individuals prime targets for scams. While large banks usually conduct traditional predatory lending, foreclosure rescues are typically carried out by local agents and investors.
The Rise of Foreclosure Services
Economic trends have created a booming market for foreclosure services. With property values rising dramatically from 2000 to 2005, many homeowners fell behind on their mortgage payments, becoming targets for scams. Once in foreclosure, their information becomes public, which allows scammers to contact them directly or through mail.
How Foreclosure Rescue Scams Operate
1. Solicitation: Scammers obtain contact information for homeowners in foreclosure and reach out personally, by phone, or through mail. Some lenders and brokers might even refer these homeowners to scammers for a commission.
2. Acquisition: Scammers arrange the closing, often delaying until just before eviction to create urgency. At closing, the homeowner might unknowingly transfer the title to the scammer or an associated investor, who then pays off the foreclosure amount and gains any remaining equity.
3. Result: The original homeowners often stay in their homes but pay rent or contract-for-deed payments higher than their original mortgage. Several states, like Minnesota and Maryland, have passed laws to regulate and prevent these schemes.
Foreclosure Options
1. Reinstatement of Loan (Cure)
Pay everything owed to the lender in one lump sum, including missed payments, late fees, foreclosure fees, legal fees, and owed principal.
2. Repayment Plan
This written agreement with the lender requires higher payments for a period to catch up on the loan.
3. Loan Modification
Involves changing the mortgage terms, such as interest rate reduction, switching from an adjustable-rate to a fixed-rate mortgage, extending the loan term, or capitalizing delinquent payments (only in extreme hardship cases).
4. Forbearance Agreement
Allows for a temporary period (typically 3-6 months) of reduced or no payments.
5. Special Forbearance (FHA Loans Only)
Eligible borrowers can postpone monthly payments for at least four months.
6. Deed-in-Lieu
This option involves voluntarily transferring property ownership to the lender in return for a release from mortgage obligations.
By knowing these options and recognizing the signs of scams, homeowners can protect themselves against foreclosure rescue schemes. Always consult with a trusted financial advisor or housing counselor before making decisions regarding your home.
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