State cracks down on foreclosure scams
Families facing foreclosure on their homes are at their most vulnerable. A new state law and heightened oversight by the Washington Attorney General's office should offer distressed homeowners greater protection against scammers.
Special to The Seattle Times | The Seattle Times
Housing helpIF YOU FACE foreclosure, you can find help from several groups:
Housing counselors: Contact a U.S. Department of Housing and Urban Development-certified housing counselor, available through community organizations such as Solid Ground and the Urban League of Metropolitan Seattle.
Lawyers: Contact a private attorney. Call the King County Bar Association or the Northwest Justice Project.
General information: Visit the Washington state Attorney General's Office Web site, www.atg.wa.gov, for help and information about scams.
Source: Solid Ground, attorney Melissa Huelsman, Washington state Attorney General's Office
In 2005, the Beck family was split in two, separated by thousands of miles. With half of his family in Florida, Reginald Beck didn't see his children for six months.
A foreclosure scam ripped the family apart and left them without a home, forcing them to live with friends and relatives to stay afloat.
After Beck lost his longtime job at a phone company, he and his wife, Rosa, couldn't make their mortgage payments, and their Puyallup home went into foreclosure.
The Becks received countless offers from people wanting to buy their house. The family grabbed onto the only offer that would allow them to stay in their home. The buyer promised to save the home from foreclosure and to allow the family to lease it until they could buy it back.
But somewhere in the transaction, the Becks unknowingly signed over their home, leaving them responsible for a mortgage but no longer owning the house.
And when they couldn't afford the lease payments, they were evicted from the home they no longer owned.
The Becks are one of a number of families who have been hurt by foreclosure-rescue scams. Attacking homeowners in their most desperate times, scammers promise to the save homes but instead take the house and leave the original owners little chance of getting back their home.
Washington has seen a dramatic increase in the number of scams in the past five years, and state officials have taken steps to protect homeowners from foreclosure-rescue scams.
A state law that took effect in June requires more disclosure in any sale involving a property in foreclosure.
This month, Attorney General Rob McKenna's office began mailing letters to homeowners facing foreclosure, warning them about possible scams. County treasurers will include the warning letter when they mail foreclosure notices to homeowners.
Five years ago, such scams were a rarity, said Dave Huey, an assistant attorney general. Now, because of the increased number of foreclosures due to a slowing housing market, the scams are becoming more common.
"A lot more people are at risk now," said Judy Poston, a mortgage counselor at Solid Ground, a nonprofit agency in Seattle.
This summer alone, Poston said she's handled more foreclosure-rescue scam cases than she did in all of last year.
Seattle attorney Melissa Huelsman, whose law practice focuses on mortgage and foreclosure fraud, said a foreclosure-rescue scam leaves a painful mark on peoples' lives.
"People are desperate," Huelsman said. "They're scared. They don't know what's going to happen. They're frantically trying to keep their house."
How a scam works
Foreclosure information is a matter of public record, so it's available to anyone who wants to see it. Scammers use it to lure in property owners. They call, send notices or knock on doors. They approach distressed homeowners in a friendly way, saying they want to help save their homes, Huey said.
"That's a dangerous representation," Huey said. "People cling to that. It clouds their vision."
Many scammers are local to Western Washington. They've often taken seminars or online courses in buying foreclosure properties. Many of them are real-estate agents or mortgage brokers, Huelsman said.
The scammers are charming and know how to earn people's trust, Poston said.
"How do these people sleep at night?" Poston asked.
Dealing in foreclosed property can be perfectly legal, Huey said. But the deception is in the details.
In a typical scam, homeowners are persuaded to transfer ownership of their home to the scammer, who tells them they can rent the home and continue to live there until they can afford to buy it back.
But the rent payments are often unaffordable, and homeowners find they are unable to buy the home back, Huey said.
Sometimes homeowners don't realize they've signed over their home but remain responsible for the mortgage.
That's what happened to the Becks.
"We got suspicious when the things they promised didn't happen," Reginald Beck said.
After the Becks were evicted, they split up to stay with friends and relatives until they found a landlord who would rent to them.
Officials say they hope the new state law will make the terms of foreclosure sales more transparent so homeowners understand them. The law requires anyone who buys a property in foreclosure to provide the homeowners with a clear contract, make sure they can afford to pay the rent, and make sure they can afford to buy back the home eventually.
Once the deal is signed, if the homeowners are unable to buy back their home, they are entitled to 82 percent of its fair-market value after the debt is paid.
Experts say the best way to prevent being scammed is to get help before you need it. Defaulting on one mortgage payment puts a homeowner in jeopardy, so housing counselors say that if homeowners suspect they might miss a payment, they should call a HUD-certified counselor for advice right away.
If a home goes into foreclosure, Huey advises the owners to be suspicious of anyone who says he or she can stop the foreclosure.
"If they're soliciting you via phone, door, direct mail, they're not a charity," Huey said. "They're in this to make business."
Copyright © 2008 The Seattle Times Company
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