Courtesy of Florence Klein, Founder, SilverPlanet.com

Fraudulent foreclosure “rescue” professionals have continued to use half-truths and outright lies to sell services that promise relief and then fail to deliver. Their goal is to make a quick profit through fees or mortgage payments they collect from troubled homeowners but do not pass on to the lender. Sometimes, they assume ownership of the property by deceiving the homeowner. Then, when it’s too late to save the home, they take the property or siphon off the equity.  

Foreclosure rescue firms use a variety of tactics to find homeowners in distress, according to the Federal Trade Commission (FTC). Some sift through public foreclosure notices in newspapers and on the Internet or through public files at local government offices. Then they send personalized letters to homeowners. Others put ads on the Internet, on television, or in the newspaper; posters on telephone poles, median strips, and at bus stops; or flyers or business cards at your front door. Their messages have varied but are simple, like: “We guarantee to stop your foreclosure.” “We Can Save Your Home. Guaranteed. Free Consultation” “We stop foreclosures every day. Our team of professionals can stop yours this week!”

Once they have your attention, they use a variety of tactics to get your money. They may offer phony counseling; get you to sign a document that surrenders the title of your house; pocket fees and file a bankruptcy case in your name, often without your knowledge; or have you surrender the title of your home while you remain in the home as a renter until you can buy it back in a few years—but the terms of the deal usually are so burdensome that buying back your home becomes impossible.

The federal government has been stepping up its efforts—through the FBI and FTC—to crack down on these businesses. The most recent is the FTC’s announcement in November of Operation Stolen Hope, a continuing federal-state crackdown on mortgage foreclosure rescue and loan modification scams. The operation involved 118 actions by 26 federal and state agencies, including six lawsuits. By the end of December, the FTC had charged three more defendants with promoting phony mortgage relief services.

The defendants falsely claimed that they would obtain mortgage modifications that would make consumers’ monthly mortgage payments substantially more affordable. After charging large up-front fees, they often did little or nothing to help homeowners renegotiate their mortgages. According to the FTC’s complaints, some of the defendants falsely claimed a high success rate and promised to give consumers refunds if they failed to modify their mortgages. Others misrepresented that they were affiliated with the federal government or consumers’ mortgage lenders or servicers.

Avoid any business that engages in any of the following practices:

• 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

If you think you’ve been the victim of one of these types of scams, report it to the FTC by calling 1-877-FTC-HELP.

If you are having trouble paying your mortgage or have received a foreclosure notice, contact your lender immediately. You may be able to negotiate a new repayment schedule. Other foreclosure prevention options are explained at the FTC’s site.

You can also contact a credit counselor through the Homeownership Preservation Foundation (HPF), a nonprofit organization that operates the national 24/7 toll-free hotline (888-995-HOPE) with free, bilingual assistance to help at-risk homeowners avoid foreclosure. HPF is a member of the Hope Now Alliance of mortgage servicers, mortgage market participants, and counselors.