For Desperate Homeowners, Scams Abound
California led the nation in foreclosures last month, and scam artists seem to be coming out of the woodwork to prey on desperate homeowners, reports CBS News correspondent Bill Whitaker.
Alexendria Craig's house is full of memories. It was her parents' home and she inherited it when they died. A picture of her great grandfather sits on the mantle.
Now she is about to lose that home after taking out a series of high interest loans that have left her hopelessly in debt. She says the loans "helped balance out what [she] was short" on payments.
Her salary as a paralegal for Los Angeles County was not enough to make ends meet. Desperate to hold onto her house, she answered a slick sounding ad that turned out to be too good to be true.
Craig agreed to pay $30,000 and to share title on her house to a foreclosure rescue company. The company said it would use equity in her house to pay off her debts, and that her credit would be repaired. After a year she thought she'd get her house back.
The company's agreement promises that clients have "sufficient equity in your home" for "paying off debt liability," "repairing your current credit," and most importantly that they'll "remain in your home without further concerns or worries."
It's a classic foreclosure rescue scam, says attorney Debra Zimmerman.
"There should be a huge red flag for anybody who offers to do this for money, because there is no reason to pay for help," said Zimmerman, of Bet Tzedek Legal Services. "Loan modifications can be done for free."
Avoiding Foreclosure
Free assistance for homeowners facing foreclosure is available from Hope Now. Visit www.hopenow.com or call 888-995-HOPE to talk to a counselor for free.
In the typical scam, the homeowner transfers title to a third party who promises to secure a lower interest rate on the mortgage. But what often happens is the third party cashes out the home's equity, leaving the homeowner as a renter.
"This is the American dream, and they're losing it. And somebody is coming and they're going to rescue them," Zimmerman said. "[The scam] is very, very appealing."
In California so many people have fallen for these scams the attorney general has issued a consumer alert.
Bbut that warning came too late for Alexandria Craig. Her house is in foreclosure, and next week she's facing eviction. Both the foreclosure rescue company and the bank foreclosing on her house deny any wrongdoing.
"You feel like you're drowning and you feel like there's nobody sending you a life raft," said Craig, sobbing.
Barring a miracle, Craig says she'll be moving into her car on next week, losing family memories and her American dream.
