January 31, 2022 Read time: 20 min
How I Avoided a Scam Foreclosure
I'm not a lawyer, and nothing here should constitute legal advice. Instead, this is a description of how I dealt with a scam attempt and how I would do so again in the future.
In early 2021, my partner and I were victims of an attempted scam from our new home loan servicing company. I won't list their name here, but we'll call them ABC Servicers. ABC sent us a bogus foreclosure notice in an attempt to wring several thousand dollars out of us for 'missed payments', using the fact that we were changing loan servicers as the reasoning for their bogus claim.
If this has happened to you, I'm sorry: it's not fun, but I'll show you the steps we took to organize our information and stop them from taking advantage of us. Although this happened to us around a home loan, this same process could help protect you from any kind of attempted scam where you can't escape from the other party, like a contractor, warranty provider, a car loan, or some other type of agreement.
Quick Background
We refinanced our house in October of 2020, when interest rates were at their lowest. We locked in a great rate with a loan originator company, knowing that they would one day sell our loan to a servicing organization. You have no control who your loan is transferred to in this process, but we didn't care. We had been with Wells Fargo for the first portion of our loan, and with all the bad press they had received, we figured we'd seen the worst of the bunch.
We were so very wrong.
We received notice in February that our loan had been transferred to ABC Servicers, and that we would receive a welcome letter, complete with all of the necessary information to start paying them. We were also told that we could legally continue paying our previous servicer for 60 days, and that those payments could not be treated as late by ABC. After two weeks had passed with no welcome letter, we payed our monthly payment to our previous servicer and we kept on the lookout for information from ABC.
The first communication we got from them wasn't an email, or a welcome letter: it came two weeks after that first payment was due, and it was a foreclosure notice. We were told we were 45 days behind on payments (?), and that they would be beginning foreclosure proceedings against us (?!), but not to worry because everyone goes through hard times and if we just paid them a few extra fees, this would all go away (?!?!). Although they had never provided us with any account login information, I was able to track down their website, create an account, and find that not only did they have the incorrect loan value listed for our property, but also the name of the property owner was someone else (a 'Vanessa J**** F****').
Step #0: Take a Deep Breath
A quote that I have used time and again has been, "Once you've decided to be angry, it doesn't help being angry anymore."
When we first received the foreclosure notice, our emotions were running high. Now, if ABC Servicers had been a sabertooth tiger and we were an early hominid tribe, that wouldn't be so bad. Direct threat (sabertooth tiger) → direct response (scream / stab). However, 21st century threats are far more indirect, and so a different approach is needed. Emotions can be very useful for getting you to a decision point, but once you've made the decision, they don't always help much on the follow through.
The best thing I was able to do was take a deep breath. I can't pretend it fixed everything, but that wasn't the point: it gave me the space to think through the next steps. When someone is trying to use the legal system against you, it can be very disorienting. Keep your head about you and you increase your chances of making it through.
Step #1: Build Your System
The way you beat these things is by being organized. The moment this kind of situation happens, it becomes a playground stand-off of "Did to! Did not!" The best way to get out of this loop and get points on your side is clear, concrete evidence. For this evidence, you need:
- What is the evidence
- What does it mean (what wrongdoing does it point to)
- When did it happen
- Who sent it / by what mechanism (email, call, etc.)
Just saying someone did you wrong isn't going to help much, but screenshots, recordings, and documents are very hard to deny, especially when it has the other party's letterhead at the top. To pull this off, you need a consistent system to store all of your thoughts and information on what's going on, and you'll want to be able to search through this system quickly and easily.
For this particular situation with ABC, I used Microsoft OneNote. That said, there are other free and paid services you can use. If I were to do it again, I would probably go with Notion: it's free to use, has a clean UI, works on mobile and desktop, and is very easy to search. Next, let's talk about how we used this system.
Step #2: Information is Your Friend
Scammers try and pressure you with short time frames and scary-sounding repercussions if you don't do what they say. That first contact from ABC certainly hit that tone. No welcome email, no introduction, nothing. Just a letter stating we owed them over $7,000 and/or that we would lose the house in 45 days. That can be a frightening thing to wake up to any day of the week, but in the middle of a pandemic it was a whole lot worse.
They're trying to make you move quickly and make a mistake. The way you take back power in a situation like this is to get educated. Now that you have a system for storing all your information (from Step 1), let's use it.
Any and every day there was an interaction with ABC in any capacity, I made a daily post, titled it with the date, and detailed all the activity that happened. If I logged in to their website, if I had a phone call, if I got a form or a letter or email: everything was stored there. It doesn't need to be long or well written, just recorded so that you can look back, know what happened, and share that information with the right people.
When making these logs, don't just say what happened. You can also make notes saying how you are interpreting the events and what you plan to do next. Things will change and adjust over time, and you want to be able to look back on what you were thinking and why. Don't write any threats or anything aggressive: this is not the place for your emotions, this is the place for the facts.
Step #3 Be Clear About What Resolution Looks Like
I have a lawyer friend who told me, "I'm not here to make someone feel better: that's a therapist's job. I'm here to get them justice." For my partner and I, someone was trying to take our home (or at least, use that as a threat to extort us). The two main things we wanted were:
- For that foreclosure notice to go away, and
- For them to refund our escrow account, since we couldn't trust them to pay our bills anymore.
While I had all kinds of frustrations with who they were as people, as my lawyer friend said, that's a conversation best for a therapist. I had to be very clear in all of my communications both with ABC and anyone else about what a 'correct' resolution would look like.
This can be a bit challenging because to find a resolution, you have to get very concrete about what they did that was wrong. ABC sending me an email that scared me isn't illegal: that's a purely subjective thing. ABC ignoring a legal and acceptable payment I made as grounds for delivering a foreclosure notice, that's illegal. More boring accusation, but it's a very concrete wrongdoing. I took the time, read up on the law (if you're in this situation, the law you're looking for is RESPA1) and found clear clauses that they had violated, such as not honoring payments during the transition period between servicers. You're not going after the soft fuzzy thing they did that bothered you: your focus should be on the very clear, one sentence statement, "They did X, and that is illegal because of Y, and I want them to do Z to make up for it".
Once you have that vision of what a resolution is, make that the clear goal. I won't lie, I also added to my list of demands that I wanted ABC to undergo a 3rd-party audit and that I wanted a signed letter from their CEO explaining what happened and how they would make sure it never happened again. I never got that letter and I don't think the audit will be happening, but it's ok to make some demands they may not meet. (Note, requesting that they be dropped in a vat of acid, as much as I may have wanted it, was one of those conversations best held with a therapist).
Step #4: Really Record Everything
When I said I made a daily post of everything that happened, I mean everything. If you get an email, copy and paste all of the text from the email into your daily post. Write a quick blurb at the top saying who you got it from, when, and your initial reactions to the message. Does it contradict what someone else said? Has the tone changed? Summarize the big points.
If you have a phone call, record it. In the same way you hear, "This call may be monitored for training purposes" when someone calls you, you can do the same thing back. Make sure to inform them that you are recording the call, but that can go both ways. The best way I was able to do it was using my phone on speaker phone, I would open some type of audio recording software on my computer, my partner's computer, or even use her phone to make sure that I had a clear recording of what was going on.
I took daily screenshots of ABC's website (you can do this with a phone or computer). Get some sort of timestamp in frame if you can (like the little clock and date in the corner of your screen), and paste that screenshot into your daily document. Not every screenshot is going to make it into your final evidence collection, but you want to have the ones that clearly show, "Why would they show this number in their online platform, when I have clear evidence that I payed them?"
Step #5: Find the Adult in the Room
This may be the single most important point here, if only because it brings it all together: the only thing that stops a bad lawyer is a good lawyer. If you are getting scammed, you need to find the defender who will try and protect you. Now, individual lawyers can be expensive, and so there are often times groups that will defend you without needing a lawyer. I live in California, a state that luckily has many consumer protections: I wound up reaching out to the Consumer Finance Protection Bureau (CFPB, a national organization), the California Department of Financial Protection & Innovation (DFPI), and the State Attorney General's Office. I wasn't sure which one of them would come down like a ton of bricks, but I knew one of them had the power to make ABC as uncomfortable as ABC had made me.
Here's how to do it.
- Write a brief summary, defining the problem, the evidence, and your desired solution. Think of this as both the thesis and conclusion paragraphs of a 5 paragraph essay. You're going to attach all of your supporting evidence after this page, but make it very clear what went wrong, how it went wrong, and what is required to make it right. If you can, make this no more than one page long: it will not only force you to be very direct, but the information will be easier to consume.
- Collect all of your relevant evidence and include that in your document. Make sure everything you include here is directly related to the problem and proof of the wrongdoing. I had dozens of screenshots showing issues with this company's website, but I intentionally limited it to specific, unambiguous issues. It's far better to have 3 clear examples of wrongdoing than 3 examples of clear wrongdoing and 2 of a misunderstanding.
- Compile it all into a cleanly formatted document. You're going to be sending this to a number of different people, so make sure you do a good job of spellchecking, formatting, etc. Get someone else to read it over if you need: put an emphasis on clear and direct language. Not aggressive, just unambiguous.
- Address it to all parties involved. When we did this, we printed 5 copies of the letter, addressed each one to one of the different groups we were sending to (4 agencies total and the scammers themselves) and wrote in each letter that we had written to all 5 of the groups. You want everyone to know that this is being widely distributed, like cc'ing on an email.
- Send it with certified mail. This will cost you some money (about $20 per letter) but it is absolutely required. According to the lawyers I spoke with, certified mail is basically 'undeniable'. The scamming group in question can't pretend that they didn't receive it, they can't claim ignorance, and if you have to take them to court, certified mail is your proof positive that they heard your message.
I know this can be a lot of frustrating steps, so if you need help from someone else, find a friend or family member who can help be your project manager. Cook them dinner, thank them profusely, but make sure you go through the steps.
Step #6: Be Patient, And Stay In The Right
You're now dealing with bureaucracy, and that can take time. I remember once we sent off our letters, I wanted to just stop paying our bills to these people because in my mind, they were the scumbags. However, this is going to take time, and in that meantime, do whatever is minimally required for you to stay in the clear. You haven't actually leveled formal accusations against them yet: what you've done is shown them your intention to. You don't want to show up in court and hear someone say, "We'll never know if they were really trying to scam you, because you stopped paying your monthly bill". Keep your nose clean so that you're ready to go for whatever may come next.
Make sure to continue recording all of your steps in your daily log system. If you get a reference number from one of the groups you reached out to, make sure you save it. If you haven't heard back in about 2 weeks, find a way to contact them again. Your original certified mail should be sufficient, but mail sometimes moves slow so keep that in mind.
Where You Go From Here
That's the limit of what I can recommend. We were very fortunate that the DFPI stepped in and firmly told ABC Servicers that they needed to address our concerns in writing, or they would revoke ABC's license to operate in the state. That honestly was the end of it: within a few days, ABC had corrected the values in our account (something they hadn't done after weeks of my phone calls), removed the foreclosure notice, and within a week or two had mailed us the check for the remainder of our escrow account, just as we requested. We were very lucky, and I appreciated the DFPI's help.
There are plenty of people who aren't so lucky: my partner and I are college-educated professionals, native to the US, who knew that something was wrong when we received that letter in the mail. But companies like ABC Servicers had clearly perpetrated this type of scam before, and we believe they chose us because we had bought a house in a previously red-lined neighborhood. They expected us to be unable to or unaware of how to protect ourselves for any number of historical or present-day reasons. This kind of behavior makes my blood boil, not just because it's exploitative and evil (it is), but because of the racist and classist discrimination it perpetuates.
Part of me honestly wishes that ABC had pushed us a little farther and been a little more flagrant: if they had, we likely would have been able to sue them into oblivion. That would have been hard and expensive and distracting, but with any luck it would have put an end to their entire business. That won't be the case this time around. But it's possible that whatever scam you're facing, you could be the one to help not only yourself, but many others less fortunate than you.