New Jersey Cautioned About "Surplus Funds" Scams Amid Rising Foreclosure Filings
Some homeowners facing foreclosure are being subjected to scams that ultimately could cost them tens of thousands of dollars, Attorney General Stuart Rabner and Acting Consumer Affairs Director Stephen B. Nolan announced. As foreclosure filing rates are increasing nationally, scams targeting homeowners facing foreclosure are rising as well. These scams typically target “surplus funds” to which homeowners may be entitled if their homes are sold at a sheriff’s sale.

New Jersey Cautioned About "Surplus Funds" Scams Amid Rising Foreclosure Filings
March 1, 2007 -- NEWARK – Some homeowners facing foreclosure are being subjected to scams that ultimately could cost them tens of thousands of dollars, Attorney General Stuart Rabner and Acting Consumer Affairs Director Stephen B. Nolan announced.

As foreclosure filing rates are increasing nationally, scams targeting homeowners facing foreclosure are rising as well. These scams typically target “surplus funds” to which homeowners may be entitled if their homes are sold at a sheriff’s sale.

“Homeowners facing the loss of their homes are understandably concerned, and con artists seize on their fears to perpetrate scams,” Attorney General Rabner noted. “These offers of help and money may seem like a godsend, but it is the con artist who ultimately benefits.”

Surplus funds are the monies remaining after the sheriff’s foreclosure sale takes place and mortgage and tax obligations have been paid. Neither the homeowner’s mortgage lender nor the sheriff’s office are required to notify the homeowner if surplus funds exist.

The Division of Consumer Affairs is alerting the public to two surplus fund scams.

In the first scam, the con artist offers to accept the property deed and, in exchange, pay the homeowner a minimal amount of money, typically no more than a few thousand dollars. By transferring the deed, the homeowner signs away ownership of his or her house and any equity that has built up.

The homeowner may be told he/she can buy the deed back if certain conditions are met. Many times, however, these conditions are almost impossible to satisfy or the scammer never intends to honor his promise. Instead, the house is sold through a sheriff’s foreclosure sale and the con artist keeps the surplus funds that result.

In the second scam, the con artist offers to assist the homeowner in obtaining surplus funds that may be available after the house is sold via a sheriff’s foreclosure sale. The homeowner often times is told that he/she cannot apply for surplus fund on his/her own, or that the process is very complicated or costly.

The con artist scams the homeowner by:

* charging an exorbitant fee that can range up to 75% of the total surplus fund;
* writing a fee in the contract with the homeowner that is higher than the fee verbally promised;
* pressuring the homeowner to sign away his/rights to the surplus funds through a quit claim deed; and
* forging the homeowner’s name on a surplus funds application and then keeping the surplus funds.

In reality, homeowners can obtain the surplus funds by filing a simple form and paying less than $100. More information is available from the N.J. Superior Court Trust Fund Unit at 609-292-3937.

“These scams have the same goal: to enrich the con artist by taking money from a homeowner in trouble,” Acting Director Nolan said. “It is unconscionable that con artists take advantage of good people who have fallen on hard times. We are working to educate and protect those facing foreclosure from these scams.”

Consumer Affairs has produced two new Consumers Briefs about the foreclosure process and surplus funds scams for the public. The briefs are being distributed to sheriffs’ offices and are posted on the Consumer Affairs’ web site:

* Surplus Funds' Scam - How to Avoid Them (579k pdf)
* Foreclosure Scams - How to Avoid Them (445k pdf)

Foreclosure filings rose 42% last year compared to 2005, to 1.2 million filings nationally, according to the firm RealtyTrac, Inc.. More than 40,000 foreclosure filings occurred in New Jersey.

Consumers can report foreclosure and surplus fund scams to Consumer Affairs by calling 1-800-242-5846 (from within N.J.) or 973-504-6200.

Source: New Jersey Governor's Office
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