Foreclosure scams are flourishing in this time of rising mortgage rates, with desperate homeowners being
lured by offers of help, only to be cheated out of the equity they’ve
built up in their home, or tricked into transferring ownership of their home,
or end up stuck paying expensive fees for little or no help.
Foreclosure scams are becoming increasingly common. Scammers often target
homeowners struggling to meet their mortgage commitments or anxious to sell
The scammer or 'rescuer' identifies struggling homeowners through public
foreclosure notices in newspapers or at government offices.
contact you by phone, postcard, flyer, advertising or even show up at your
home. You will usually find that the initial contact is a simple
message stating that they can help you keep your home.
If you decide to have a meeting with them, they will promise a fresh start.
They will also ask you to stop talking to anyone but them as they will
handle all the negotiations for you.
foreclosure scams have evolved over time, however, the end result is always the
same The homeowner loses everything!
The homeowner may be forced out of the
home and the scammer will move in tenants and collect rent until the home is
foreclosed on, leaving the homeowner straddled with the debt. The scammer
may also 'sell' the property to someone, victimizing both the buyer and
The Main Types of Foreclosure Scams
People involved with foreclosure scams typically promise to help
homeowners who are in financial straits but instead charge exorbitant fees
for services with little or no value, strip equity out of victims’ homes, or
take ownership of the homes outright.
Phantom help – The supposed rescuer charges
high fees for no work or for services that the homeowner could have
easily handled or obtained free from legitimate organizations
Bailout – A homeowner surrenders the title to the
home after receiving a false promise that the he or she can remain as a
renter and buy back the home later. The scammer obtains possession
of the home and most or all of its equity
Bait and switch – Homeowners are told they can refinance
their homes but instead sign documents transferring the titles to scammers,
while the victims remain responsible for making the mortgage payments
Businesses that carry out these scams often refer to
themselves as 'foreclosure consultants' or 'foreclosure rescue specialists.'
They use high-pressure sales tactics and distribute cards or flyers with
messages such as 'Stop foreclosure with just one phone call,' or 'I’d like
to buy your house.'
Do I have Options with Foreclosure Scams?
There is help available when facing financial problems or foreclosure, but
make sure you are dealing with a reputable organization before getting
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
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.
Your lender may be able to temporarily reduce or suspend your payments
for a fixed period of time. At the end of that time, you must make a
lump sum payment or enter into a long term repayment plan to pay back
the reduced or suspended amount. Forbearance may be a good option when
the cause of your default is specific and temporary and it is reasonable
to assume you will be able to resume making payments at the end of the
Your lender may be able to arrange a simple repayment plan whereby you
make your mortgage payment plus an amount of the total in default. The
plan could be a few months long, or may extend to a year. At the end of
the time period, you would have paid off the past due amount and your
payments go back to the original payment amount. Your lender or servicer
may require a good faith payment upfront to begin the plan. A repayment
plan may be a good option when the situation that caused your default is
resolved. For example, the default may have occurred because you were
unemployed for a period of time, but you have now become employed again.
You may be able to refinance the debt and extend the term of your
mortgage loan. This will help you catch up by possibly reducing the
monthly payments to a more affordable level. You may qualify if you've
recovered from a financial problem but your net income is less than it
was before the default.
Your lender may be able to work with you to obtain an interest-free loan
from HUD to bring your mortgage current, if you qualify.
This will allow you to sell your property and pay off your mortgage loan
to avoid foreclosure and damage to your credit rating. If you're unable
to afford the house long-term, you may sell the house yourself before
the foreclosure sale and save some of your equity.
Deed-in-lieu of foreclosure
As a last resort, you may be able to voluntarily "give back" your
property to the lender. This won't save your house, but may help your
chances of getting another mortgage loan in the future.
Red Flags of Foreclosure Scams
Be suspicious of an person or company that call themselves foreclosure
consultants, foreclosure experts or a foreclosure expert
Be suspicious of high-pressure marketing techniques or pressure to sign
Be very careful with a company or individual who requires fees before
providing any services to you
Be suspicious of anyone who instructs you to make your mortgage payments
directly to them or their company
Be suspicious of offers to take title to your home and lease it back to
you, promising that you can buy it back over time
Be suspicious of promises to 'save your credit' or find a buyer for your
home within a specified number of days
Advice for Foreclosure Scams
Don't sign any papers you don't fully understand.
Take the time to review it carefully and ask questions if it doesn’t
make sense to you
Don't sign any document that has blank spaces or
Make sure you get all the "promises" in writing
Signing over the deed to someone else doesn’t
necessarily relieve you of your loan obligation. If your name is still
included on the documents, you’re still liable for repaying the loan
Check with your attorney or your mortgage company
before entering into any deal involving your home
Check to see if there are any complaints against the
prospective buyer if you’re selling your house
It is important to talk to a 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
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 www.hud.gov,
or seek advice from a government-sanctioned program, such as HOPE NOW
Resources for Foreclosure Scams
Check the website of the U.S. Department of Housing and
Development [HUD] to locate a
counselors [they are listed by state].
Foreclosure prevention resources are available at the
following web site:
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.
Our best advice is,
DON’T SIGN ANYTHING
before having a licensed attorney review the paperwork.