There are more foreclosures in the United States for a number of reasons. In fact, the rate has gone up by about 70% since a year ago. Part of this is because rising interest rates are making it hard for people with adjustable rate mortgages who bought their homes three or four years ago to pay their bills. Many of these mortgages were set to change after three years, and because the payments went up, the people who owned the homes could no longer afford them. Thousands of people have had to leave their homes because they had few options. This is a bad situation that can sometimes be avoided, especially if the owners talk to their lenders about their problems. Instead, many owners have answered ads from companies offering "foreclosure help," hoping to find a way to keep their homes despite their financial problems. In many cases, the owners not only don't get the help they need, but they end up giving their houses to the companies they thought would help them keep them.
It's a common scam that takes advantage of people who are desperate. Mortgage companies that want to foreclose on homeowners who haven't paid their bills must give notice to the county where the homeowner lives. These notices are put up by the county, and investors write down the addresses. They do some research to find out how much the house is worth and how much is still owed on the mortgage. The investors look for homes with a lot of equity in them. Then, they go up to the owner and offer to "help" them out with their money problems. The offers are different, but the deal usually includes an offer to pay off the past-due amount and rent the home back to the owner for a certain amount of time. At the end of that time, the investors say they will give the former owner who is now a tenant the chance to pay back the money and get their home back. These offers seem like a gift from God to homeowners who are desperate to keep their homes.
Most of the time, the deals don't work out well for the owner. Most of the time, the paperwork that comes with the offer includes a quitclaim deed. Once the owner signs it, the investor basically owns the property. The investor, who is now the owner of the property, then asks the owner-turned-tenant to pay a rent that is too high. When the renter can't pay, the investor kicks them out of the house and sells it for a profit. In some cases, investors have made hundreds of thousands of dollars off of a single property for as little as a few months' worth of missed mortgage payments. The old owner has lost everything.
Some states, like Minnesota, have passed laws that make this practise very hard to do. Other states, like Florida, have been unable to pass similar laws because of strong opposition from business groups. Flyers offering help with foreclosure can be found on phone poles in almost every city in states with few rules. If homeowners who are having money problems respond to these flyers, the last thing they will get is help. If a homeowner is having money problems, they should call their lender first. Lenders don't want to take back homes, so buyers should call their lender instead of giving their home to a stranger who advertises on telephone poles.
