Watchdog: Beware of homeowner scams

State Housing officials say a new $300 million program to help homeowners at risk of foreclosure may also unleash a wave of scam artists trying to cash in on the unwary.

Officials at the South Carolina State Housing Finance and Development Authority say they are not aware of any immediate major problems, but worry that their efforts to publicize the program and the amount of money involved might draw scammers like chum for sharks.

Whenever there’s this type of money available and efforts are underway to make the public aware, it might create an opportunity for scammers, Clayton Ingram, the agency’s director of marketing and communication, said.

Ingram said he knows that some scammers are already at work because he’s talked on the telephone with financially troubled homeowners who have told him they have been contacted by people offering, for a fee, to help them obtain reduced mortgage payments.

“No one should have to pay to get these types of assistance,” Ingram said. The State Housing office’s programs are free.

Valarie Williams, State Housing’s Executive Director, said in a prepared statement, “there are some unethical opportunists looking to exploit the situation... Experience tells us that scammers prey on people who are in desperate situations. You need to know what you’re up against in order to protect yourself.”

The Housing office provided the following explanation of some of the most common loan modification scams out there:

Phony Counseling or Foreclosure Rescue Scams: The scam artist poses as a counselor and tells you he can negotiate a deal with your lender to modify your loan or save your house — if you pay him a fee first. The fee may be called a processing fee or administrative fee. He may even tell you not to contact your lender, lawyer or housing counselor — that he’ll handle all details. He may even insist that you make all mortgage payments directly to him while he negotiates with the lender. Once you pay the fee, or a few mortgage payments, the scammer disappears with your money.

Fake “Government” Modification Programs: Some scammers may claim to be affiliated with, or approved by, the government, or they may ask you to pay high, up-front fees to “qualify” for government mortgage modification programs.

Bait-and-Switch: The scam artist convinces you to sign documents for a “new loan modification” that will make your existing mortgage current. This is a trick. You actually just signed documents that surrender the title or deed of your house to the scam artist in exchange for a “rescue” loan. Thoroughly read any document before you sign it.

Rent-to-Own or Leaseback Scheme: A scammer urges you to surrender the title or deed of your home as part of a deal that will let you stay in your home as a renter and then buy it back in a few years. He may tell you that surrendering the title will permit a borrower with a better credit rating to get new financing — and keep you from losing your home. However, the scammer may have no intention of ever selling the home back to you. Worse yet, when the new borrower defaults on the loan, you’re evicted.

Warning signs that you are being scammed

– SC Housing