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How to spot mortgage refinancing fraud

Con artists prey on the vulnerable and desperate. It's probably no surprise, then, that there's an entire industry of cons directed at people who are at risk of losing their homes.

Getting behind on your mortgage is a terrifying prospect. It's only natural to look for ways out the situation -- and there are some good options out there. Unfortunately, you also have to be wary of a number of scams out there targeting financially-troubled homeowners. These operations will be happy to take your money as long as you are willing to pay -- but they won't actually do anything that will help you. In fact, they will probably make your situation worse.

How do schemes involving foreclosure rescue work?

One popular scam involves companies that promise to secure mortgage refinancing for troubled consumers. Instead, they divert the homeowner's mortgage payments and fees right to their own pockets.

Another scam involves getting a consumer to transfer partial interest in a home to several (possibly fictitious) people. The partial owners than file bankruptcy one at a time. Each time, the bankruptcy trustee will delay the foreclosure of the home. Meanwhile, the original homeowner keeps making payments to the scammers while under the impression that a refinancing agreement is in place -- until time finally runs out and the house is foreclosed upon.

However, these are only two of the schemes being used, so it pays to learn about more about common mortgage foreclosure rescue scams.

How can you protect yourself against these scams?

There are many legitimate programs out there for people who are in financial trouble and looking to refinance their mortgage. The key to avoiding the scam artists out there is knowing how to protect yourself.

To avoid falling victim to a con artist, make certain that:

  • You stay in contact with your mortgage lender directly at all times
  • Do not sign over any portion of your ownership rights -- even if it is supposed to be "temporary"
  • Insist that all promises be put in writing
  • Do not sign anything that you don't fully understand

Real estate transactions can be incredibly complex, even when they're wholly legitimate. If the paperwork you have been given to address your situation seems overly complicated, it's wise to get advice before you commit.

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