How to Avoid Foreclosure Rescue Scams
Indiana’s Attorney General has filed suit against ten companies who took advantage of homeowners in financial distress, i.e. foreclosure rescue scams. Given the nature of my practice, I’ve encountered many homeowners with horror stories about foreclosure rescue scams. ”They promised me a loan modification, took $2,500, and I never heard from them again.”
Unfortunately, there is sometimes no way to know for sure if the company with whom you are dealing is a “scam” until after the fact. That said, here are some warning signs that the company with whom you are dealing may not be on the “up and up”:
1. An out of state company. I have received inquiries from from homeowners facing foreclosure from all over the country. My response is always the same. “Unfortunately, I can only represent homeowners with properties in Florida.” Is that to say it’s impossible for an out-of-state company, or even an out-of-state lawyer, to help you? Not necessarily. That said, how is someone going to handle a foreclosure lawsuit from out of state?
2. A non-lawyer. If you’re sued for foreclosure, there are only two types of people who can defend the foreclosure lawsuit – (1) the defendant/homeowner; and (2) a lawyer. A non-lawyer cannot defend a foreclosure case; to do so would constitute the unlicensed practice of law.
3. A guarantee. The Rules Regulating The Florida Bar preclude lawyers from guaranteeing a result to a client (in any case, including foreclosure cases). Even if the Rules did not so require, I’d never give a client a guarantee. Unfortunately, there’s no way to know, for sure, what the bank is going to be willing to do in the future. Likewise, there’s no way to know, for sure, how a judge will rule. If you’re being given a guarantee, chances are pretty good that it’s a scam.
4. Up-front payments. This one is tough, because most lawyers charge up-front fees. So don’t view this as a determining factor in and of itself, but consider it in conjunction with the others. In other words, if an out of town, non-lawyer is guaranteeing you a loan modification and requiring you to pay up front, chances are excellent that it’s a scam.
5. The company instructs you not to communicate with your bank. It’s hard for me to envision a scenario where I’d tell a client who is seeking a loan modification or some other resolution in lieu of a foreclosure not to talk to the bank. If that’s what you’re being told, chances are good that your “foreclosure rescue” company doesn’t want you to talk to your bank to catch on to the fact that they aren’t doing anything.
6. The company is not filing papers in response to your foreclosure lawsuit. As I’ve blogged repeatedly, meaningful loan modifications are few and far between, especially prior to a foreclosure lawsuit being filed. If the “foreclosure rescue” company you’ve retained is not going to defend your foreclosure case, chances are they aren’t going to help you.
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