photo by Quint Cobb Foreclosure Relief, Flickr

Today’s economy has created a very high foreclosure rate.  It is said that one in four homes in much of the U.S. are either foreclosed against or are under foreclosure proceedings. Some areas such as California are experiencing even higher numbers of foreclosures.

Generally, one could say that there are two basic types of foreclosure—the mortgage foreclosure and the deed of trust foreclosure.  Both end basically in the same manner, namely the property owner loses his property, but legally the steps to foreclosure are slightly different.  Also be aware that different states have inserted special rules in their mortgage laws that could change or alter some of the following descriptions.
The Mortgage Foreclosure

The mortgage foreclosure begins by thereunder issuing a formal demand for payment, in the form of a “notice for default.”   A notice is sent through the mail, often by return-receipt-request, to the borrower and outlines how the borrower is in default.

Various reasons can be that the borrower has not paid for his home insurance that primarily carries the name of the lender in case of loss, or perhaps the borrower has been negligent in paying his taxes in a timely manner, or most commonly, the borrower has failed to make agreed upon payments to the lender.  Eventually this kind of foreclosure will result in a judiciary foreclosure whereby the judge allows the lender to reclaim the property, or foreclose.

Again generally, the borrower is given “X” amount of days to make up the deficiency. Usually this amount also includes late fees, interest, and even the cost of the lender to take the borrower to court.  Ordinarily when the mortgage and note were originally made these terms were spelled out for the borrower.  Thus it should not be a complete surprise for the borrower to be so treated.

A Deed Of Trust Foreclosure

In this instance, the borrower is referred to as the trustor, the lender becomes the beneficiary and an impartial third party who retains the title will be referred to as the representative of the lender or trustee.  In this illustration the title to the property was being held as security for the loan.  Again, as in the mortgage foreclosure, terms for this handling of the title, etc. has been agreed to when the loan was initiated.

Because there are no courts involved, property passes quickly from the trustee to either the beneficiary or even a buyer of the property.  Again, there are many similarities to either manner of foreclosure.  Both require notice, and both give the borrower a grace period to make the payments, etc.

Which manner your particular state uses is governed by foreclosure laws that with a little diligence you can learn about on the Internet. This may in turn help you avoid mortgage fraud or even help you avoid foreclosure should it come to that.  It has been noted however, that the best reaction you should have to financial problems that may lead to foreclosure is to get in touch with your lender as soon as possible.

photo by Camera Fraud, Flickr

Being threatened with foreclosure is an anxiety-producing event in your life, and one that will keep you up all night with constant worry. Those who lurk to perform scams and fraud unfortunately abound in these times. Prior to giving into any promises, be sure and perform serious investigative research of not only the company, but also the offer itself. And do remember that if it sounds too good, it probably is fraud!

One type of scam is one that makes you the landlord of the property in question. The shyster promises to pay off the loan threatening you with foreclosure, if you sign a “quit claim deed” to the scammer and he then will rent the property enabling you to collect enough rent to live elsewhere rent-free. He will be the tenant, and he will filter the rent he owes you to the landlord you will rent from.

After a few months of excuses, you find that the “tenant” is gone, the bank is still foreclosing and you’ve signed a worthless deed that has given you no protection against foreclosure at all.  Chances are, your property has been “trashed.” Variations of this scheme can be easily found.

The Middleman Scam

For some reason, people who are facing foreclosure refuse to discuss the problem with the lender.  In walks a person who says that you do not need to visit with your lender all alone, that they will accompany you and act as the middleman for you.  Of course, there’s a very hefty charge for this handholding.

Or, another variation on that scam is that many middlemen say that they will talk to the lender FOR you provided you show good faith and make payments to the middleman who will then provide the payment to the lender.  Of course they never make the payments. There are as many variations on this as there are in music styles.

Confidence Men

Regardless of the name of the scam involved, usually the modus operandi involves the fact that you do not wish to contact the lender, and the scammer is a perfected con man, who gains your confidence and then scams you. There are pressure scams that exhort you to sign something immediately while there’s still time, there are so-called professional counseling agencies that charge exorbitant figures in order to accomplish absolutely nothing.

photo by Quint Cobb Foreclosure Relief, Flickr

Over and over again, people have been warned that they need to visit their lender and see what the lender is willing to do to keep you in the property.  After all they are swamped with foreclosed properties, and do not wish yet another property to try to manage, fix up, rent or sell.  If working with the lender does not produce anything to your satisfaction, turn to a HUD-approved housing counseling agency.  How to be sure it’s a HUD-approved agency?  Again verify it with your lender.

Above all, inform yourself of scams, real counselors, government programs and do make a visit to your lender.  There is a lot of power in correct useful information. Avail yourself of it, for it may save you from a scam someday.