Tampa Foreclosure Scams Beware

Be careful homeowners, do not be one of the victims in Florida, specifically Tampa foreclosure scams.

Foreclosure Scams Lurking In Your Neighborhood

Delinquent homeowners looking to break free from default notices are getting tricked by brokers promising to save them from foreclosure, only to make off with thousands in fees or what home equity is left.

Take rent-to-buy scams. In cases like these, a fraudulent rescue company convinces a homeowner to sign over the title while building equity as a renter. The homeowner avoids foreclosure but risks being evicted by the very firm that promised to save his home.

The situation is bad enough in Florida, one of the nation’s foreclosure capitals, that State Attorney General Bill McCollum has filed suit against National Foreclosure Management, a mediation company, for allegedly defrauding troubled homeowners; fraudulent rescue companies in Illinois have been increasingly penalized, while in Massachusetts the for-profit practice of foreclosure rescue transactions has been banned.

With rising foreclosures threatening homeowners, rescue brokers prey on subprime or adjustable rate borrowers because many facing foreclosure are overextended and desperately looking for a way out of their mortgages.

Bad-News Bailouts

Low-level schemes involve those who pose as mediation specialists or counselors promising to rescue homes from foreclosure. Naturally, they work for a fee. While they might not charge an excessive amount of money, between $300 and $6,670, according to the Illinois state’s attorney’s office, the Federal Trade Commission says that once homeowners pay that first check, these so-called specialists disappear.

It hurts to lose a few hundred dollars, or even a thousand, but the wilier schemes involve surrendering the title.

The most basic involves pushing on homeowners’ phony documents that appear to be a new mortgage application. These are known as rescue loans which, if correctly represented, give a homeowner the cash to stave off a foreclosure. Instead, these false documents turn over the title.

A more sophisticated version of this scam involves a rent-to-buy provision. Here, a mediator matches a distressed homeowner with a management company that takes over the property while giving the homeowner the ability to become a long-term renter, with his rent paying down the mortgage.

The premise here is that the management company has great credit and can refinance at a better rate, which they will do for a fee. This arrangement is attractive to a delinquent homeowner because the months-long foreclosure process is a black mark on a credit report.