Foreclosure Rescue Scams

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					 FTC Facts                                                                   Federal Trade Commission

  For Consumers                                                              For The Consumer

February 2008

Foreclosure Rescue Scams:
Another Potential Stress for Homeowners in Distress

T     he possibility of losing your home to foreclosure
      can be terrifying. The reality that scam artists
are preying on the vulnerability
                                                              If you think you may be facing foreclosure,
                                                          the Federal Trade Commission (FTC), the nation’s
                                                          consumer protection agency, wants you to know
of desperate homeowners is                                                 how to recognize a foreclosure
equally frightening. Many                                                     rescue scam. And even if the
so-called foreclosure                                                             foreclosure process has
rescue companies or                                                                 already begun, the FTC
foreclosure assistance                                                             and its law enforcement
firms claim they can help                                                            partners want you to
you save your home.                                                                     know that legitimate
Some are brazen enough                                                                  options are available
to offer a money-back guarantee.                                                        to help you save your
Unfortunately, once most of these foreclosure                                        home.
fraudsters take your money, they leave you much the
worse for wear.                                           How the Scams Work
     Fraudulent foreclosure “rescue” professionals        Foreclosure rescue firms use a variety of tactics to
use half truths and outright lies to sell services that   find homeowners in distress: Some sift through
promise relief and then fail to deliver. Their goal       public foreclosure notices in newspapers and on the
is to make a quick profit through fees or mortgage        Internet or through public files at local government
payments they collect from you, but do not pass on        offices, and then send personalized letters to
to the lender. Sometimes, they assume ownership           homeowners. Others take a broader approach
of your property by deceiving you, the homeowner.         through ads on the Internet, on television, or in the
Then, when it’s too late to save your home, they          newspaper, posters on telephone poles, median strips
take the property or siphon off the equity. You’ve        and at bus stops, or flyers or business cards at your
lost your home to foreclosure despite your best           front door.
2 FTC Facts For Consumers

The scam artists use simple and straight-forward         Rent-to-Buy Scheme
messages, like:                                         You’re told to surrender the title as part of a deal
    “Stop Foreclosure Now!”                             that allows you to remain in your home as a renter,
    “We guarantee to stop your foreclosure.”            and to buy it back during the next few years. You
    “Keep Your Home. We know your home is               may be told that surrendering the title will permit
scheduled to be sold. No Problem!”                      a borrower with a better credit rating to secure new
    “We have special relationships within many banks    financing – and prevent the loss of the home. But
that can speed up case approvals.”                      the terms of these deals usually are so burdensome
    “We Can Save Your Home. Guaranteed. Free            that buying back your home becomes impossible.
Consultation”                                           You lose the home, and the scam artist walks off
    “We stop foreclosures everyday. Our team of         with all or most of your home’s equity. Worse yet,
professionals can stop yours this week!”                when the new borrower defaults on the loan, you’re
    Once they have your attention, they use a variety   evicted.
of tactics to get your money:                                                         In a variation, the scam
                                                                                 artist raises the rent over time
Phony Counseling or
Phantom Help                      Fraudulent foreclosure “rescue” to the point that the former
                                                                                 homeowner can’t afford it.
The scam artist tells you that
                                     professionals use half truths               After missing several rent
he can negotiate a deal with
                                                                                 payments, the renter – the
your lender to save your house and outright lies to sell services
                                                                                 former homeowner – is
if you pay a fee first. You
                                     that promise relief and then evicted, leaving the “rescuer”
may be told not to contact
                                               fail to deliver.                  free to sell the house.
your lender, lawyer, or credit
                                                                                      In a similar equity-
counselor, and to let the scam
                                                                                 skimming situation, the scam
artist handle all the details.
                                                                                 artist offers to find a buyer
Once you pay the fee, the scam artist takes off with
                                                        for your home, but only if you sign over the deed
your money.
                                                        and move out. The scam artist promises to pay you
     Sometimes, the scam artist insists that you
                                                        a portion of the profit when the home sells. Once
make all mortgage payments directly to him while
                                                        you transfer the deed, the scam artist simply rents
he negotiates with the lender. In this instance, the
                                                        out the home and pockets the proceeds while your
scammer may collect a few months of payments
                                                        lender proceeds with the foreclosure. In the end,
before disappearing.
                                                        you lose your home – and you’re still responsible for
Bait-and-Switch                                         the unpaid mortgage. That’s because transferring
You think you’re signing documents for a new loan       the deed does nothing to transfer your mortgage
to make your existing mortgage current. This is a       obligation.
trick: you’ve signed documents that surrender the
title of your house to the scam artist in exchange for
a “rescue” loan.
                                                                       FTC Facts For Consumers 

Bankruptcy Foreclosure                                     You also may contact a credit counselor through
The scam artist may promise to negotiate with          the Homeownership Preservation Foundation
your lender or to get refinancing on your behalf if    (HPF), a nonprofit organization that operates
you pay a fee up front. Instead of contacting your     the national 24/7 toll-free hotline (1.888.995.
lender or refinancing your                                                       HOPE) with free, bilingual,
loan, though, the scam artist                                                    personalized assistance to
pockets the fee and files a             If you’re having trouble                 help at-risk homeowners
bankruptcy case in your name                                                     avoid foreclosure. HPF is a
– sometimes without your
                                        paying your mortgage or                  member of the HOPE NOW
knowledge.                           you have gotten a foreclosure Alliance of mortgage servicers,
     A bankruptcy filing often                                                   mortgage market participants
stops a home foreclosure, but
                                      notice, contact your lender and counselors. More
only temporarily. What’s                        immediately.                     information about HOPE
more, the bankruptcy process                                                     NOW is at
is complicated, expensive,
and unforgiving. For example, if you fail to attend    Red Flags
the first meeting with the creditors, the bankruptcy   If you’re looking for foreclosure prevention help,
judge will dismiss the case and the foreclosure        avoid any business that:
proceedings will continue.                               • guarantees to stop the foreclosure process – no
     If this happens, you could lose the money you          matter what your circumstances
paid to the scam artist as well as your home. Worse      • instructs you not to contact your lender, lawyer,
                                                            or credit or housing counselor
yet, a bankruptcy stays on your credit report for 10
                                                         • collects a fee before providing you with any
years, and can make it difficult to obtain credit, buy
a home, get life insurance, or sometimes get a job.
                                                         • accepts payment only by cashier’s check or wire
Where to Find
                                                         • encourages you to lease your home so you can
Legitimate Help                                             buy it back over time
If you’re having trouble paying your mortgage or
                                                         • tells you to make your mortgage payments
you have gotten a foreclosure notice, contact your
                                                            directly to it, rather than your lender
lender immediately. You may be able to negotiate
                                                         • tells you to transfer your property deed or title to
a new repayment schedule. Remember that lenders             it
generally don’t want to foreclose; it costs them
                                                         • offers to buy your house for cash at a fixed price
money.                                                      that is not set by the housing market at the time
     Other foreclosure prevention options, including        of sale
reinstatement and forbearance, are explained in          • offers to fill out paperwork for you
Mortgage Payments Sending You Reeling? Here’s What       • pressures you to sign paperwork you haven’t had
to Do, a publication from the FTC. Find it at               a chance to read thoroughly or that you don’t                                                understand.
 FTC Facts For Consumers

Report Fraud                                                    The FTC works for the consumer to prevent
If you think you’ve been a victim of foreclosure           fraudulent, deceptive and unfair business practices
fraud, contact:                                            in the marketplace and to provide information
  • Federal Trade Commission                               to help consumers spot, stop, and avoid them.
  • Your state Attorney General                            To file a complaint or to get free information
  • Your local Better Business Bureau                      on consumer issues, visit or call
                                                           toll-free, 1-877-FTC-HELP (1-877-382-4357);
For More Information                                       TTY: 1-866-653-4261. The FTC enters Internet,
To learn more about mortgages and other credit-            telemarketing, identity theft, and other fraud-related
related issues, visit and               complaints into Consumer Sentinel, a secure online, the U.S. government’s portal to               database available to hundreds of civil and criminal
financial education.                                       law enforcement agencies in the U.S. and abroad.

                                              Federal Trade Commission
                                           Bureau of Consumer Protection
                                    Division of Consumer and Business Education

                           For The Consumer                Federal Trade Commission

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