Mortgage Problems and the Myth of Foreclosure Help

The rising rate of home foreclosures in the United States, up by about 70% over the past year, is largely driven by increasing interest rates. Homeowners who purchased their properties with adjustable-rate mortgages (ARMs) are particularly affected, as their payments have become unaffordable due to rate adjustments. As a result, many homeowners are forced to abandon their homes.

In their desperation to avoid foreclosure, some homeowners turn to companies advertising "foreclosure help." Unfortunately, these companies often exploit vulnerable individuals. Here's how the scam typically works:

How the Scam Works

1. Notice of Foreclosure: Mortgage companies notify counties of impending foreclosures, which are then posted publicly. Investors monitor these notices to identify properties with significant equity.

2. Offer of Assistance: Investors approach homeowners with offers to help, which often include promises to cover delinquent mortgage payments in exchange for renting the home back to the owner for a set period. The investors also claim they will allow the owner to repurchase the home after this period.

3. Deceptive Agreements: Homeowners, eager to keep their homes, may agree to the terms. However, the deal usually involves signing a quitclaim deed, transferring ownership of the property to the investor.

4. Exorbitant Rent and Eviction: Once the investor owns the property, they often charge excessive rent. When the former owner-turned-tenant can't afford the rent, the investor evicts them and sells the property for a profit.

State Regulations

Some states, like Minnesota, have enacted laws to restrict these predatory practices. However, in states with fewer restrictions, such as Florida, such scams remain prevalent. Flyers advertising foreclosure help are commonly found, but they rarely offer genuine assistance.

Advice for Homeowners

Homeowners facing financial difficulties should contact their lender directly rather than responding to advertisements. Lenders are often willing to work with homeowners to find solutions and avoid foreclosure. Trusting a stranger advertising foreclosure assistance can lead to losing one's home and financial stability.