A former boss and friend of mine (from the good ol tech days - actually, wait a minute, those weren't good days then, that was 2002 after the dotcom era turned dotbomb and 9/11 really shut off IT budgets! We played more table Fussbal then than we did work! I'll never forget the day when just about the entire company was cheering on the four Fussball players and John, the president of the company said something like, "Hey guys, here it is, 3pm, sales suck, and here we are all not working and playing Fussball... what does that say about our company? Well, fortunately for John and all the other stockholders, they ended up selling the company to some finance guys who really must have had horse blinders or some form of optimistic tunnel vision only seeing the black ledgers of pre-2002. What a digression! Back to the opening line!) brought my attention to an article about foreclosure scams - mostly about con artists who proport to be able to "save" someones home.
The wires have been packed with articles about such saviors. Jerks like these have always been around, but as the old saying goes, "Where there's pain, there's opportunity!"
While I appreciate the article, it is one sided, biased, and not at all objective (but hey, it came from the Chronicle, I'm not surprised :o)
I won't take the time to comb through it all, but two things in particular stand out. Having personally attended a real estate investing "bootcamp" on foreclosures in 2003, I can attest that not everyone who solicits a distressed homeowner in foreclosure is out to take advantage of them. Unfortunately, for whatever reason - illness, divorce, and disability are the traditional three - sometimes, people truly can't afford their mortgage anymore. In such cases, having a bonafide real estate investor help them take the home off of their hands can be a win-win-win situation.
- A win for the homeowners because the torture of the foreclosure process is put to an end and they can begin a new chapter in their life. Also, since a "settlement" with the lender would be reached, this is not as bad as a carried through "foreclosure" (in the nine levels of delinquency, the former is an I7 and the latter is an I9. Also worthy of mentioning is that the Notice of Default - NOD - will STILL be on that persons credit report severely impairing their ability for applying for future home loans for the next seven years that it remains on their credit report; though they still could get a half way descent loan after about three years have passed)
- A win for the lender because they will save a lot more money by selling to an investor at a discounted rate than they would by repossessing the property and the listing it on the market (banks sell money well, not houses!)
- A win for the investor because of the discount purchase (typically 35% or more below fair market value, but often less in high value areas such as California)
I read recently that about 50% of those foreclosed on NEVER pick up the phone to speak with their lender! Their stress and fear often paralyze them. However, IF they DO have the ability to keep up with their payments - such as before their ARM adjusted to a new sky high rate or they've recovered from their illiness and are now back to work - then lenders ARE making deals with homeowners! I spoke with two homeowners recently and both were able to get their lenders to give them terms they could afford (in one case, the individual's loan was ABOUT to reset, he was unable to refinance, yet he was current on his payment - I told him to proactively contact his lender, what to say, what to do and they agreed to only increase his interest rate by a small percentage).
So while the media loves to paint the doom and gloom - specifically that only 1% of those in foreclosure have worked it out with their lender - don't fall for the hype and conclude it's an ability issue - it's more of an information issue!
Secondly, the media in general seems to have an aversion to credit repair. I guess it must be because the bad apples in the bunch that take advantage of people by taking their money but doing nothing to their credit report - or worse, bringing their score down - must mean that the whole bushel should be thrown out. The reality is that while people can indeed try to clean up their credit on their own, the majority do not because of ignorance and lack of time. There are four companies that I know and trust and have referred clients to that do an excellent job of "boosting" peoples credit scores under the guidelines of the Fair Credit Reporting Act.
The article ends with some quick bullet points which I did think were helpful. If you know of anyone in foreclosure, behind on their payments, or has an ARM due to reset soon, I'd be happy to help them think through their problem and help them find a solution.
How to spot a foreclosure rescue scams: p>
-- An offer to "save" your home after you're behind on payments is likely to involve fraud, experts say.
-- Don't sign anything without getting a copy and looking it over in advance, ideally with an attorney, housing counselor or other knowledgeable person.
-- Are there up-front fees? Under California law, foreclosure consultants are not allowed to demand payment in advance.
-- Is the organization offering help certified by the U.S. Department of Housing and Urban Development? HUD agencies are free or low-cost and must conform to certain standards.
-- Does it involve someone else getting title? "Temporary" transfers of the deed are almost certainly a scam.