Foreclosure Rescue Scams

Foreclosure rescue scams are surfacing at an alarming rate in the US - why?

Rising costs of health care, housing and education, combined with increased job uncertainty, income volatility and eroding salary levels, have placed American homes at a financial risk like never before.

The thought of foreclosure if frightening.

Fraudulent foreclosure 'rescue' professionals use half truths and lies to sell services that promise relief and then fail to deliver. Their goal is to make a quick profit from you through fees or mortgage payments they collect, but do not pass on to the lender.

Sometimes, they assume ownership of your property by deceiving you. Then, when it’s too late to save your home, they take the property or drain off the equity. You’ve lost your home to foreclosure despite your best intentions.

How Do Foreclosure Rescue Scams Work?

If you are falling behind on your mortgage, the vultures [scammers] start circling. They know that people in these situations are vulnerable and often desperate.

Potential victims are easy to find because mortgage lenders publish notices before foreclosing on homes.

Private companies frequently compile and sell lists of these foreclosed properties and distressed borrowers.

After reading these notices, scammers approach their targets either in person, by mail, over the telephone, or by e-mail. They often advertise their services on television, radio, or the Internet, and in newspapers, describing themselves as 'foreclosure consultants' or 'foreclosure experts' offering 'foreclosure prevention' or 'foreclosure rescue' services.

And they are only too happy to take advantage of homeowners who want to save their homes.

The initial contact typically centers on a message that tells homeowners that they can stay in their house easily, get a 'fresh start,' keep their credit rating or receive instant cash.

During the first meeting, the homeowner is often told to stop all contact with lenders, credit counselors or lawyers and let the 'rescuer' handle all the details. This cuts off your access to legitimate financial solutions.

The scammer generally looks to make a quick profit through fees or direct mortgage payments that are never passed on to the lender. Sometimes the scammer takes ownership of the property by deceiving the homeowner.

Once it is too late to save the home, the rescuer either takes the property or the owner loses the home to foreclosure after it has been drained of equity through fees and charges.

Types of Foreclosure Rescue Scams

foreclosure rescue scams

Bait and Switch

The scammer offers to arrange a new loan to make your existing mortgage current.

When you sign the 'new loan,' the scammer includes documents that turn over the title of the house to the scammer. In some cases, the scammer uses the title to defraud a new lender by taking out a second loan on the property and pocketing the proceeds.

Victims of this scam often don't know they've been cheated until they get an eviction notice.

Rent-to-Buy Scheme

The scammer offers you a deal to let you stay in your home as a renter and then buy it back over the next few years.

Victims are sometimes told that surrendering the title will allow a borrower with better credit rating to get new financing – and prevent the loss of the home.

However the terms of the deal are so burdensome it becomes impossible to buy back the house. You lose your home, and the scammer walks off with all or most of your home’s equity.

When the scammer defaults on the new loan, you are evicted.

Sometimes, the scammer raises the rent over time to the point that you can’t afford it. After missing several rent payments, you are evicted, leaving the 'rescuer' free to sell your home.

Equity Skimming

In these foreclosure rescue scams, the scammer offers to find a buyer for a homeowner facing foreclosure, but only if they sign over the deed and move out. The scammer promises to pay a portion of the profit when the home sells.

Once the deed is transferred, the scammer rents out the home and pockets the proceeds while the lender proceeds with the foreclosure.

Victims of this scam lose their home however they are still responsible for the unpaid mortgage! Contrary to the scammer's promises, transferring a deed to another party doesn't end a homeowner's responsibility to pay back a mortgage.

Unauthorized Bankruptcy

In these foreclosure rescue scams the scammer promises to negotiate with your lender or to get refinancing on your behalf in exchange for an upfront fee.

Instead, the scammer pockets the fee and enters a bankruptcy filing in your name, usually without your knowledge, by forging a signature or concealing the true nature of the paperwork.

Though a bankruptcy filing often suspends a foreclosure, it doesn't end it permanently. Once in bankruptcy, you face additional legal costs and bear the burden of a credit record that will make it difficult to buy or rent a new home for as long as 10 years.

Do I have Options with Foreclosure Rescue Scams?

There is help available when facing financial problems or foreclosure, but make sure you are dealing with a reputable organization before getting involved so you can avoid the foreclosure rescue scams.

If you've received a foreclosure notice, contrary to what the scammers would have you believe, contact your mortgage company first. There are many remedies available, including renegotiating the terms of your mortgage, that can save your home or failing that, allow you to walk away with most of your equity.

Your mortgage lender can help you find real options to avoid foreclosure. It is important to contact your mortgage lender early to preserve all your options. There are legitimate consumer financial counseling agencies that can help you work with your lender.

If you can't refinance, renegotiate or sell quickly, it may make sense to look at filing for bankruptcy.

Most people fear or loathe bankruptcy, and understandably, however it may be a more reasonable option instead of carrying on and maintaining a debt that you may still be obligated to pay.

Red Flags of Foreclosure Rescue Scams

If you’re looking for foreclosure prevention help, avoid any business that:

  • Guarantees to stop the foreclosure process – no matter what your circumstances
  • Instructs you not to contact your lender, lawyer, or credit or housing counselor
  • Collects a fee before providing you with any services
  • Accepts payment only by cashier’s check or wire transfer
  • Encourages you to lease your home so you can buy it back over time
  • Tells you to make your mortgage payments directly to it, rather than your lender
  • Tells you to transfer your property deed or title to it
  • Offers to buy your house for cash at a fixed price that is not set by the housing market at the time of sale
  • Offers to fill out paperwork for you
  • Pressures you to sign paperwork you haven’t had a chance to read thoroughly or that you don’t understand.

It is important to talk to an attorney or legal aid organization, since your rights vary from state to state. Most states and large cities have legal aid organizations; to find one near you, go to the Legal Services Corporation, a government-sponsored organization that provides high-quality civil legal assistance to low-income Americans.

Homeowners in danger of foreclosure should work with their lenders to avoid foreclosure, consult a counselor approved by the U.S. Department of Housing and Urban Development, or seek advice from a government-sanctioned program, such as HOPE NOW

Resources for Foreclosure Rescue Scams

Check the website of the U.S. Department of Housing and Development [HUD] to locate a HUD approved counselors [they are listed by state].

Foreclosure prevention resources are available at the following web site:

Foreclosure Rescue Scams prevention [HOPE NOW is an alliance of HUD-approved counseling agencies, mortgage companies, investors and other mortgage market participants that provides free foreclosure prevention assistance. The site also has a HOPE hotline on 1-888-995-HOPE which is staffed by HUD-approved credit counselors who can guide homeowners to foreclosure options.

To learn more about mortgages and other credit-related issues, visit and, the U.S. government’s portal to financial education.

Our best advice is, DON’T SIGN ANYTHING before having a licensed attorney review the paperwork. 

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