Short Sale and Foreclosure Fraud in Los Angeles

We’ve all seen them. The signs on billboards, on TV or the Internet, on fliers pasted to telephone poles, or the ones you see stuck in the ground on it seems like just about every intersection:

“Stop foreclosure now!”
“We can save your home. Guaranteed. Free consultation.”
“We stop foreclosures every day! Let our team of professionals stop yours!”

Have you wondered about these claims (or are you rolling your eyes like I am)? If you are desperate enough and looking for a short sale in Los Angeles or are on the verge of foreclosure, you may be tempted to call one of these companies, and you might be just what they are looking for.

You are the easy mark they are looking for.

Unfortunately, so have been a couple of my friends who came to talk to me – their “mortgage expert”. Since I am in the business, I guess it makes sense that they would come to me to help them sort out their thoughts about what’s a real offer for help and what’s not.

The following are some of the rules I came up with in how to avoid short sale and foreclosure fraud. Oh and these apply to not only LA, but anywhere in the US.

Never pay an upfront fee in advance of services rendered. Sometimes the scam artist will pocket your money and file bankruptcy in your name, without your knowledge. Bankruptcy may stop foreclosure but you could still lose your house – and the money you paid to the scammer.

If someone tells you to let them handle all the details and to not contact your lender, attorney, or credit counselor, it is probably a scam.

Do not sign any documents without showing them to your attorney. A common scam is the “bait-and-switch” in which the documents you thought were a new loan actually transfer your property title to the scam artist.

Do not agree to surrender the title to your house in order to rent it back with the rent going towards payments. Usually the scammer will raise the rent to an amount you cannot afford, and then evict you, keeping your house.

Never make mortgage payments to a third party who is not your lender, and never make payments with a cashier’s check or wire transfer – unless it is specifically with your lender per their direction.

And last but not least – never sign your deed over to someone for any amount of cash or for any reason. If you have a mortgage on your home, the mortgage lender must be involved in letting you transfer ownership. If you transfer ownership without getting rid of the mortgage – guess what – you will still have the mortgage and now you don’t have the collateral to show for it.

Hopefully these pointers to fraud can help you stay out of trouble. For sure, there are real offers out there, but you have to be careful and do your homework. Check references, the Better Business Bureau and your state’s Attorneys General. Stick to your gut and good luck.