Real Estate News

By Charles J. Kovaleski

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Many homeowners are searching desperately for cash and calm amid the economic downturn. More people are out of work and home prices are tumbling, both of which are factors that increase the foreclosure risk.

As consumers face pressure across Florida and around the nation, predators posing as mortgage saviors entice these at-risk homeowners with schemes they say will provide their rescue. In fact, however, the faulty plans are designed to swindle consumers out of more money, or worse, the very home they`re trying to save.

A new Florida law - the Foreclosure Fraud Protection Act - took effect Oct. 1. A key protection in the law is the creation of a three-day right-of-cancellation period. Further, would-be foreclosure rescuers must present a written agreement that must be signed by both parties. The contract also must include a recommendation that the homeowner contact his or her lender or mortgage servicer prior to signing the agreement, which must inform the homeowner that the consultant is prohibited from accepting payment until all services are completed. The law also provides better remedies for consumers.

Scam artists practiced in foreclosure fraud often aim their plots at homeowners who are unable to pay their mortgage but retain sizeable equity. Lists of at-risk owners are generated by examining notice of default lists and cross-referencing them with local property tax rolls.

Armed with these lists, criminals send mail, post flyers or phone nerve-wracked homeowners with the phony offer of helping them avoid foreclosure often through an upfront fee or through dubious a lease-buyback arrangement. The deals sounds great - and that`s when unsuspecting consumers let their guard down and fall prey.

The new law is designed to provide a better shield for homeowners, said Florida Attorney General Bill McCollum.

"This is aimed at someone who comes along and tells people they`ll help them save a home," McCollum said. "Those who are unscrupulous, but basically don`t provide service. This new law will provide some new tools to us."

Violators face deceptive business-practices charges.

"Anybody who`s thinking that they might have to give up their home, should go to the bank or the mortgage company and try to negotiate somehow to reduce the payments, change the plan, so they can afford it," McCollum said.

At-risk consumers can protect themselves by understanding all legal documents and seeking advice from their real estate attorney, real estate broker or Housing and Urban Development Counselor. There also scam-avoidance guidelines available from the Florida Office of Financial Regulation and the National Consumer Law Center. Other tips:

KNOW THE RED FLAG BEHAVIORS: If you`re instructed to not contact your attorney, lender, housing counselor or similar, this indicates something foul is afoot. If you hear that the prospective foreclosure counselor can "guarantee" that it can stop the process no matter the circumstances then there`s cause for concern. Further, if the "foreclosure expert" offers to complete all the paperwork for you to save time, that could signal trouble ahead.

BE WARY ABOUT SIGNING OVER YOUR DEED: If anyone suggests that you need to sign away ownership of your home, this is a clear warning sign. Seek professional guidance if you choose this route so that you understand the legal implications. By signing over your deed, you lose your rights to your home and all equity that has accrued. A common scam is the fictitious buyback or lease-back option, which involves signing over the deed. The unfulfilled promise is that the unsuspecting homeowner thinks he or she has agreed to remain in the home as a renter with the option of buying it back later. Consumers may hear that surrendering their deed helps them improve their credit so that new financing can be obtained. In reality, the fake rescuers retain possession of the house, including most of its remaining equity.

PHANTOM HELP: The scam here is that the homeowner is promised help - but only if he or she pays a fee first. The con artist then leaves with the money. Don`t pay for anything upfront.

DON`T SIGN WITHOUT READING: If a document is too complex to understand, seek the advice of a real estate attorney or a trusted financial advisor. Refuse to sign documents that contain erroneous information or blank spaces that can be filled in. One form of fraud is a bait-and-switch. Homeowners are told by mortgage broker imposters that they`re signing documents to refinance a burdensome mortgage when they`re actually signing over ownership of the home.

MAKE MORTGAGE PAYMENTS YOURSELF: Do not trust anyone to make mortgage payments for you. Criminals often insert themselves or unscrupulous third-parties into the equation to steal your money.

These are uncertain times. But the economic pressure should not be compounded by con artists pretending to offer consumers relief. Seek genuine counseling from your real estate attorney, broker or other professionals. An old bromide provides a good dose of protection: If it sounds too good to be true, it probably is.

Charles J. Kovaleski is president of Attorneys` Title Insurance Fund, Inc., (The Fund) the leading title insurer in Florida and the sixth largest title insurance company in the country. Acknowledged as the Florida residential real estate expert, The Fund has been in business for more than 50 years and supports a network of more than 6,000 attorney agents statewide who practice real estate law. The Fund, based in Orlando, Fla., underwrites more than 300,000 title insurance policies for owners and lenders in Florida every year. For more information, visit www.MyRealEstateStory.com.