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This article is taken directly from the
California Society of Enrolled Agents publication CSEA BEAcon (March 1, 2008).
Franchise Tax Board Offers Tips on
Avoiding Mortgage Scams
When a lender files a foreclosure or schedules a home for public auction,
the matter becomes public record - easily accessible at any county clerk or recorder's office.
Scam artists often access these records and target people in financial distress.
The state's"90 Days of Hope" campaign was created to shine a spot-light on some common scams.
According to Department of Consumer Affairs director Carrie Lopez,
the best advice for consumers to follow is,"if it sounds too good to be true, it is."
The Bailout
In this scam, a con will offer to buy the victims home and promise the victim
that they can live in the house for a fixed rent until they can buy back the home.
The victim signs a document that turns over the title, but doesn't release them
from responsibility of the mortgage (sometimes called a "quit claim deed").
Subsequently, the new "owner" collects the rent without paying the mortgage
and lets the loan default.
When the lender forecloses the victim is left with no home,
a foreclosed mortgage, and bad credit.
The Bait & Switch
In this scam, often targeted at non-English speakers,
someone shows up at a home claiming to be with the home-owner's loan company.
The con asks the homeowner to sign documents so that they can keep their homes.
They sometimes even promise to eliminate the debt owed.
The homeowner needs a way out and is overwhelmed by the sheer number of documents
they are being asked to sign. One of those documents is a "grant deed"
that passes the home's title to a third party -
the scammer, who then allows the loan to default.
The victim is then evicted, left with no home, a foreclosed mortgage, and bad credit.
Foreclosure for a Fee
Opportunists who advertise to homeowners that they can offer "advice" on staying
in the home until they are evicted make it seem as though walking away from your
foreclosed home has few consequences while charging hefty fees for their products.
Don't be fooled; foreclosure is never the first option and comes with adverse
consequences to the home-owners and the state. It can take years for homeowners
to repair their credit after a foreclosure.
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