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Homeowners facing foreclosure must avoid these lending tactics

If you get a foreclosure notice and your lender wont modify your loan then it could be best to move and rent, says Sandra Cantu. Photo by Licensed via istock, photographer Jeremy Poland.

By Don Simkovich

November 28th, 2023

The U.S. median home price is hovering around $391,800, according to property data provider ATOM.

Paying a mortgage is tough due to higher interest rates and paying inflated prices on necessities like groceries. During October 2023, foreclosure filings nationally were down 6.03% from September but still up 6.47% from 2022.

In October, the states with the most foreclosures per population were Delaware, Ohio, and New Jersey according to

If you’re a homeowner in pre-foreclosure or facing foreclosure, then watch out for these tactics from lenders who say they can help you keep your home.

Real estate investor Sandra Cantu of Rescue Reality, Tampa, Florida, is an experienced investor who’s experienced foreclosure firsthand. She says there are three red flag warnings to watch for.

Tactic 1 Monthly fees

“The number one tactic is you’re charged a monthly fee by a legal and or consumer firm to delay the foreclosure. Unless a loan modification has been approved by your lender or you are able to repay the back-owed payments, you are delaying the inevitable and causing further damage to your credit report.”

Cantu says that by paying a firm a monthly payment to delay the foreclosure, homeowners are paying their own rent without rebuilding their creditworthiness.

Sandra Cantu suggests not spending money to fix up a home going into foreclosure and trying to sell for market price. Photo by Licensed Feverpitch Deposit Photos

Tactic 2 Processing the loan modification

The second tactic is homeowners are contacted by an ombudsman i.e., representative, claiming that they can process the loan modification. Cantu says “the problem with this is if you are charged a high or monthly fee with no limit, they can stall the foreclosure with monthly payments. A homeowner can process their own loan modification, and at no costs.”

Tactic 3 Borrowing hard money

Cantu says this is a trap. “Hard money lenders will write a convoluted contract loaning monies bringing up the arrears with a substantially high interest rate and impossible terms to satisfy. They hope that the homeowner will default. When that happens, the money lender will take possession of the property.”

What homeowners facing foreclosure should do

Sandra Cantu says homeowners should work with their current lender as much as possible to process a loan modification with their current lender. If that doesn’t work, then cut your losses. A short sale may be the best route to take, but don't spend money trying to fix up a house and put it on the market.

“It’s best to cut your losses and move forward by renting somewhere. You can plan to purchase another house in 2 to 3 years when your credit score has improved.”

Sandra Cantu is a real estate investor who's experienced foreclosure and has empathy for those she speaks with. Photo by Sandra Cantu.

Sandra Cantu’s firm, Rescue Reality, works primarily in Florida, but she follows markets across the United States.

Note: I have written blog posts for Sandra Cantu and this article is being written without compensation.


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