Mortgage Scams

Beware Mortgage Scams!

Lenders are required to publish upcoming home foreclosure sales in the newspaper before the sale takes place. Unethical people and companies prowl the classified ads, looking for these foreclosure notices, and for the people who own the homes and are trying to keep them. This creates a ripe environment for scammers.

Not everyone who approaches you about an upcoming foreclosure sale is a scam artist. But, you should be cautious and use common sense when someone contacts you, especially if they advertise on a phone pole, or leave a card or a flier on your doorstep. If an offer sounds too good to be true, it probably is not true, it’s probably a scam. Here are some common scam patterns. There are ways to avoid all of them.

Scam #1 – Bogus Consulting Services

The scam: Someone calling themselves a “foreclosure consultant” sells you “services” that, in reality, are things that you can easily do yourself. Or, for an upfront fee, they promise to negotiate with your mortgage company and get you a loan modification. Then, after they get the upfront fee, they disappear. Sometimes they tell you to break off communications you are already having with your mortgage company or a legitimate housing counselor. This is a big red flag.

How to avoid it: There’s a law about this in New Hampshire. It is called RSA 479-B. This law says that nobody can sell you any foreclosure consulting services without a contract. The contract MUST:

• Be in writing, in the language that you speak
• Be given to you to look at, before you agree to anything
• Clearly disclose the services you are getting, and what you are paying for them
• Disclose the name and contact information of the consultant
• Give you the right to cancel the contract at any time
• Attach two copies of a “Notice of Cancellation” that you can use at any time

Here is a link to the law: https://gc.nh.gov/rsa/html/XLVIII/479-B/479-B-2.htm

Scam #2 – Bogus Bailout

The scam: The “foreclosure rescue specialist” offers to pay money to your mortgage company, to bring your mortgage up to date. They ask you to sign some papers. They tell you that you are just signing a loan for the rescue money. Or, they tell you that you are signing over title to your home to them, but don’t worry, you can stay in the home as a tenant, and eventually buy it back. But once the papers are signed, you find out that you don’t own your home any more, and you’re not likely to be able to own it again.

How to avoid it: The law RSA 479-B covers this scam, too. It is illegal to ask someone to sign over title to their home as a way to avoid foreclosure, without giving the homeowner a very clear document first. This document MUST:

• Be given to you 72 hours before you sign any document that transfers title to your home
• Have the words “notice of loss of ownership” at the top
• Be the entire agreement – no side deals!
• Be written in your language
• Clearly disclose all the terms of the agreement, including the dollar amount of all money being paid to you, or to others on your behalf, and who is paying it
• Give you the right to cancel the transaction within 5 business days
• Attach two copies of a notice of your right to cancel the transaction

Here is a link to the law: https://gc.nh.gov/rsa/html/XLVIII/479-B/479-B-3.htm

Scam #3 – High Pressure Sale for Less than Fair Market Value

The scam: A home buyer will directly contact you by phone or mail, or might be contacted by you after you see an ad claiming “we buy ugly houses” or “we buy any home fast”. Once the homebuyer makes contact with you, they will relentlessly pressure you to sell your home quickly, without considering other offers or listing the home for sale publicly.

These high pressure home buyers usually target homeowners who are experiencing financial trouble, behind on their mortgage or struggling with debt, and promise that selling their home will get the homeowner money fast and ‘fix’ your debt or mortgage problem. The homebuyers may try to scare you into rushing to sell your home, by telling you incorrect or misleading information about the risk to your home caused by your financial difficulties, by placing a short deadline to accept an offer from them, or by repeatedly calling you to try to get you to sign a sale agreement.

The prices these high pressure home buyers pay for homes is far less than the home is worth if it were sold through the ordinary sale process. Sometimes this means homeowners are paid hundreds of thousands of dollars less than their home is worth.

Once you sign an agreement to sell your home, even if you change your mind before the sale is completed, the homebuyer can sue you for ‘specific performance’ to force you to complete the agreement to sell the home.

How to avoid it: First and most importantly, do not sign any agreement to sell your home without taking time to think about the offer, what your other options are, and discussing the purchase offer with friends or family you trust.

Unfortunately, if you are pressured into signing an agreement to sell your home at an unreasonably low price, there is little you can do to back out, or undo the sale, unless the high-pressure home buyer lied to you about facts you relied on in deciding to agree to the sale.

If you were lied to about the risks you faced if you didn’t sell your home right away (such as being told the town would take your home due to back taxes, when that wasn’t true), the high-pressure homebuyer may have committed unfair business practices under RSA 358-A:2.

If the buyer engaged in an unfair business practice, you may file a lawsuit to stop the sale of the home, or if the sale has already happened, recover damages equal to the difference between what you were paid for your home and what it was worth at the time of sale, plus attorneys fees.

The link to the law is here: https://gc.nh.gov/rsa/html/XXXI/358-A/358-A-mrg.htm

Scam #4 – Equity Upside Loan

The scam: A lender offers to lend you money, in exchange for owning the right to a part of the equity interest from the increase in the value of your home going forward. These are sometimes called equity kicker agreements, shared appreciation contracts, option contracts, home equity sharing agreements, or Home Equity Investment loans (HEIs). These loans seem to offer free money with no monthly payments, but there’s a catch: when the loan matures or you sell your home, the entire amount owed must be paid, and if you can’t pay that amount, you can be foreclosed on and lose your home.

Most of these types of loans are designed to look like an ‘option’ for the company to purchase a share of your home and become a co-owner of the home. When the company does purchase that share of your home, the homeowner must put the house up for sale (if the homeowner has not already done so) or buy the company’s share back. If you can’t buy the company’s share back (basically, pay back the loan), they can force the sale of your home to get their money.

Sometimes, the loan looks more like a regular loan with monthly payments due, but with lower payments and interest rate because the loan contract also gives the lender a part of your home’s equity increase, which must be paid as a lump sum in the future or you can be forced to sell your home.

How to avoid it: There aren’t a lot of laws to protect from these types of scams yet, but if the lender lied to or intentionally misled you about how the loan would work, they may have committed unfair business practices under RSA 358-A:2. If the buyer engaged in an unfair business practice, you may file a lawsuit to invalidate the loan contract, stop the sale of the home, or if the sale has already happened, recover damages equal to the difference between what you were paid for your home and what it was worth at the time of sale, plus attorneys fees.

The link to the law is here: https://gc.nh.gov/rsa/html/XXXI/358-A/358-A-mrg.htm

What to Do if You’re a Victim

Contact 603 Legal Aid by going back to “Home” and clicking on the “Apply Now” button. Or, call (603) 224-3333, Mon-Thurs between 9:00 a.m. and 12:30 p.m.

Here is a link to some other resources that you might find helpful: https://www.nhhfa.org/resources-for-homeowners/