Scam targets homeowners faced with foreclosure
"Foreclosure rescue sounds like something good, but it isn't. There are some sharks out there," Arizona Attorney General Terry Goddard said. "They are taking advantage of desperate homeowners and need to be stopped."
The Phoenix-area housing market is among those ripe for these schemes. Groups are going after the 50 percent jumps in equity that homeowners gained during the price run-ups of a few years ago.
There are legitimate companies and nonprofit housing groups that can and want to help people, but they don't deluge the homeowner, experts say.
Mary D'Amico was in the middle of a divorce last fall and was struggling to make the payment on the Queen Creek home she and her husband bought in late 2004.
After she fell a few months behind, the calls from her lender started. Then came the calls offering help.
"I didn't know how they got my name, my phone number or so much information on how much money I owed," D'Amico said. "I needed about $6,000 to catch up on my payments, and people were offering to lend or even give me exactly that much."
D'Amico wasn't suspicious of the foreclosure-rescue group she worked with. It had ties to her friend's church.
She got the $6,000 she needed. And she started making payments to the group that was supposedly helping her catch up. Her monthly payments were a little higher, so she thought her mortgage had been refinanced to include the $6,000. She didn't know she had signed over her house in the process. She found out when the group sold the house out from under her.
Felecia Rotellini, superintendent of the Arizona Department of Financial Institutions, said complaints are on the rise from people who lost their home after they signed documents they didn't know about or understand.
"The foreclosure-rescue groups are getting creative in how they try to befriend the homeowner," she said. "But ultimately, it's financial exploitation."
Foreclosure scams have been around for a while. They are increasing because subprime loans are putting more homeowners in precarious positions as their interest rates climb.
The typical foreclosure-rescue scheme plays out like D'Amico's story. After an Arizona homeowner is at least three months behind, the lender can file a notice of trustee sale with the courts. That starts the foreclosure process and makes the homeowner's problem public.
The calls, knocks at the door and letters offering help begin. The typical Valley homeowner facing foreclosure gets at least 300 pieces of mail from groups offering some type of help, real-estate attorneys say.
"If someone knocks at your door and offers help, assume they are out to help themselves," said Diane Drain, an attorney specializing in foreclosures and bankruptcies.
Homeowners are typically offered some money and told they can refinance. Then the supposed rescue plan will help them clean up their credit so they can get a better loan with a lower rate.
The homeowners are so relieved - believing they will be able to keep their home - that they sign blank documents or documents they don't understand. The documents, however, turn the home over to the foreclosure group. A quitclaim deed can do that in Arizona.
The monthly payments they are making become rent payments, though they don't usually know that until either the home is sold or they are evicted.
"These homeowners are emotionally overwhelmed, and these so-called rescue groups call or show up at their door offering sympathy and what looks like help," said Bettina Franco, a real-estate agent with Home Smart Real Estate. "Homeowners are signing over their houses for a few thousand dollars. It's sickening."
