When homeowners are facing mortgage default and possible foreclosure, they may fall prey to a multitude of avowed mortgage relief providers. Unfortunately, many of these individuals and companies are ineffectual and some are outright scams. They often put distressed homeowners in any even worse financial position.

The following are common mortgage relief scams identified by the Federal Trade Commission (FTC):

1. Phantom modification— Fraudsters posing as mortgage assistance providers promise to negotiate with your lender for a loan modification. They have you make payments to them but never contact the lender.
2. Forensic loan audits — Alleged experts offer to review your mortgage documents to see if your lender complied with applicable law, claiming they can use this information to stop foreclosure. However, the only remedy available upon finding such errors is loan cancellation, which would require you to return the borrowed funds.
3. Bait and switch— Some scammers promise to get you a good deal on a “rescue” loan so that you can avoid a mortgage default. But one of the documents they have you sign is a deed giving them title to the home. They then sell the home and keep the profits, leaving you saddled with the original mortgage.
4. Rent to buy — Alleged relief providers promise that if you transfer them the deed to your home, they will secure their own financing to avoid foreclosure. They further promise to allow you to stay in the home as a tenant, with your rent payments being applied to buying back the home. In reality, they sell the home and keep the profits, and you will likely be evicted.
5. Equity-skimming— Scammers persuade you to sell your home for cash at a price much lower than the selling price of similar homes in your neighborhood. However, they require you to sign over the deed to them and move out. They then lease out the home and keep the rent money. In the meantime, the lender can go ahead with foreclosure.

A red flag for these scams is that the perpetrators demand cash up front, typically by means of a cashier’s check, wire transfer or mobile payment app, so that you can’t get your money back.

If you’re faced with mortgage default and possible foreclosure, Chapter 13 can be a far better option. Filing this form of bankruptcy initiates an automatic stay, which halts all debt collection activity. Then, you can adopt a plan to settle mortgage arrears and other debts over a three- or five-year period, paying off only a portion of what is due. This reduced debt burden can help you pay your regular mortgage payments on time going forward.

The Law Offices of James C. Zimmermann is a bankruptcy law firm with wide experience helping New Jersey residents use Chapter 13 for mortgage relief. We have offices in Hackensack, Nutley, Wayne, Pompton Lakes and Vernon. To schedule a free initial consultation, call 973-764-1633 or contact us online.