Foreclosure Rescue And Foreclosure Options

Foreclosure rescue, also called equity skimming or equity stripping, is any of a variety of predatory real estate practices aimed at vulnerable, regularly low-income, homeowners who are facing foreclosure in the United States. Most frequently, these transactions benefit from uninformed, low-income homeowners.

The term "foreclosure rescue" has occasionally referred to subprime lending refinance practices that charge excessive fees thus "stripping the equity" out of the home.  This practice is very often being described as foreclosure rescue scams.  Although most do not consider foreclosure rescue a form of predatory lending per se, foreclosure rescue is related to traditional types of that practice. 

Subprime loans targeted at vulnerable and unsophisticated homeowners frequently cause foreclosure, and those victims more regularly fall to foreclosure rescue scams.  Also, some do think about foreclosure rescue, in essence, a form of predatory lending act since the scam works fundamentally like a high-cost and dangerous refinancing.  Foreclosure rescue, however, is conducted nearly always by local agents and investors, while traditional predatory lending is carried out by large banks or national companies. 

Trends in the United States economy have caused the growing market for foreclosure services and foreclosure rescue. 

Foreclosure 

When a homeowner is falling behind on his mortgage payments he will enter foreclosure.  Foreclosure notices are published in newspapers or distributed by reporting services to investors and rescue artists.  Foreclosed homeowners also contact lenders to inquire about refinancing options. 

Solicitation Rescue artists obtain contact information of foreclosed homeowners and make contacts personally, by phone, or through direct mail.  Some lenders and brokers will also refer foreclosed homeowners who don't qualify for new loans to rescue artists for a commission.  Then the rescue Artists contact the foreclosed homeowner and give him a "miracle refinancing" and/or say they could "save the home from foreclosure”. 

Acquisition Rescue artists will arrange the closing (often delaying the date until right before the homeowner's removal in order to create urgency).  At the closing, the homeowner will transfer title (probably unwittingly) to the rescue artist or an organized investor.  After this the rescue artist or organized investor pays in full the amount owed in foreclosure and obtains the deed of the property, and inherits or is paid any portion of the homeowner's remaining equity. 

The result would be that the homeowner will stay in the home and pay rent or contract for deed payments (frequently higher than their previous mortgage payments)  They make it very hard for the homeowner to make these payments.  Several states have passed laws to avoid and/or regulate foreclosure rescue schemes.  Minnesota and Maryland passed laws in 2005 aimed at "foreclosure reconveyance" practices .  The statutes also ban certain deceptive and unfair practices related to foreclosure rescue. 

Foreclosure Options 

Reinstatement of Loan (Cure): This option consists of paying the lender everything that is owed in one lump sum to include missed payments, any late fees related to these payments, foreclosure fees, legal fees and the principal owed throughout the delinquency.   

Repayment Plan: This is a written agreement between the lender and the seller.  These intends require higher payments than the regular monthly mortgage amount for a period of time until the loan is brought current. 

Loan Modification: A loan modification or loan adjustment is the changing of one or more terms of a mortgage.  Loan modifications can be considered to decrease the interest rate of a mortgage, change the mortgage product (from an adjustable rate to a fixed rate, for instance), extend the term of the mortgage or capitalize delinquent payments (add any delinquent payment to the mortgage balance-only available in severe hardship situations). 

Forbearance Agreement: The lender will give you a period of time (3-6 months usually) of either low payments or no payments at all on your mortgage 

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Special Forbearance (FHA Loans only): This will allow eligible borrowers to postpone monthly mortgage payments for a minimum of four months. 

Deed-in-Lieu: A Deed in Lieu is an option where a borrower voluntarily deeds collateral property in exchange for a release from all mortgage obligations.