Foreclosure "Rescue" Scams and Other Sharks

Summary:  If your Colorado home is in foreclosure, you will almost certainly be the target of one or more foreclosure “rescue” scams. The sole purpose is to steal the equity in your home, and almost always leave you with worse credit. Get help from an attorney before you do anything with a foreclosure consultant or other shark. Never deed your home to a trust, LLC, or middle man. New laws in Colorado now generally prohibit this.

You Will Be Approached by Foreclosure Scams in Colorado

Fraud Warning - foreclosure “rescue” scams target those who have fallen behind in their mortgage payments. A con artist promises to help save the home - but he is really intent on stealing the equity in the home.

If the Notice of Election and Demand has been recorded with the county clerk, you will now likely offers of “help” from different strangers. Most of these offers will end up taking your equity and leaving you with nothing but big bills. Often your credit is worse.

How Foreclosure “Rescue” Scams Work

1. Phantom Help. Where the “rescuer” charges outrageous fees either for light-duty phone calls and paperwork or makes a promise of additional representation that never happens.

Generally the you will be left without assistance to save your home and little or no enough time to get competent help by the time you find out what the con artist is doing. In other words, the clock is run out to the point where you have no viable options to keep your home.

2. The False Bailout. Here you surrender time to your home under different schemes where you are supposed to have the right to get your home back. Most often the sale/lease-back scheme is used where you have the right to rent the home and then buy it back later. But almost always you are never able to get the home back, and the rescuer takes all of your equity and your home. Sometimes you are asked to deed your property to a trust, LLC, or middle man. Don't do it.

3. Bait-and-Switch. Here you do not know that you are transferring the ownership of your home by deeding it to the rescuer. In most cases, you are led to believe that you are signing new loan documents. But instead, you are giving your home to the rescuer. Sometimes the deed is forged.

Ways You Can Avoid a Foreclosure Rescue Scam:

Look for the following instances of fraud where you will lose your equity:

1. An offer of a quick “buyout” or “cash for your home.”

2. Sale and lease-back offers - a plan in which your are encouraged to sell the home for much less than its value, but with an offer to rent it back until you can buy it again.

3. Promises to “cure” your default or “repair your credit.”

4. Claims of foreclosure solutions, a plan to stop your foreclosure.

5. Offers to cure the default with a 2nd mortgage with a high interest rate and payment terms which you almost certainly cannot meet, thus virtually assuring the loss of your equity and your home.

6. A request to falsify loan documents or other documents to misrepresent the value of the home or employment income to qualify for a loan. When you have no real ability to repay the loan.

What to Do When You Are Approached by Someone Who Wants to "Save" Your Home

1. Don’t sign any documents until you have had an attorney review them - it is generally now illegal in Colorado for them to deed your property to a trust, LLC, or a middle man.

2. Understand that any deed means that you are selling your home - don't sign any deed unless you are doing it at a title company.

3. Essentially all lease-back plans are plans to steal your home equity.

Get legal help from a competent attorney before you do anything with a Foreclosure Rescue consultant.

Legal Challenges to Foreclosure Rescue Scams

You may have a number of options if you have been victimized by a foreclosure scam.

1. Colorado has a new law which regulates how foreclosure consultants may operate. Although attorneys are generally exempt, as well as certain activities of real estate brokers and mortgage brokers. Colorado prohibits the collection of any fees by a foreclosure consultant until after the services have been provided. You may be able to get a refund of money collected in advance.

2. Colorado Unfair and Deceptive Trade Practices Act prohibits abusive and unfair practices and misrepresentations. Successful lawsuits may entitle you to 3 times damages and attorney fees.

3. Truth in Lending Act (TILA) A sale/lease-back plan may be a thinly disguised loan, such to Truth in Lending rescission rights. TILA provides the right to rescind a non-purchase money (refinance) loan if the loan was not used to purchase the home. This includes first or second mortgages. You may have up to 3 years to rescind based on a TILA violation.

4. Fraud and conspiracy laws. And unconscionability, breach of fiduciary duty, and contract legal claims.

5. Home Improvement Fraud. Loans secured by a deed of trust where the proceeds are used to pay a home improvement contractor and the contractor ripped you off or did shoddy work, may be cancelled.