Consumer Law

Scam Alert: Home Foreclosure "Rescue" Scams

There has been a significant increase in homeowners facing the possibility of foreclosure due to the recent mortgage crisis. In many cases, your mortgage payments may have increased dramatically over a short period because of adjustable rate mortgages. In other cases, your income may have gone down or been completely lost. In addition, credit markets are tight. Homeowners in need may be unable to find help and are willing to reach out to anyone offering a lifeline that may save the family home.

Unfortunately, there's no limit to the number of scam companies willing to defraud homeowners. Foreclosure "rescue" scams are increasing, and homeowners facing foreclosure or pre-foreclosure should beware. Like reassessment scams, these scam companies piggyback on recent government efforts to help homeowners. They offer "help" that mimics the help offered by the Make Home Affordable program. The scams vary widely, but usually seem too good to be true. They make inflated promises, and provide few results.

How the Scam Works

In the foreclosure rescue scam, mailings are sent out to people either facing foreclosure or in pre-foreclosure. Names are taken from lists obtained by searching public records. The mailings promise to rescue the homeowner from financial distress. Statements like "Stop Foreclosure Now" and "Save Your Home" are common. The offer may seem like a life raft if you have fallen behind on your mortgage payments.

When you make the phone call, an "agent" tries to earn your trust. Once the agent gains your trust, the scam unfolds in several different ways:

  1. The company may charge an up-front fee for acting as a go-between you and your lender. In many cases, the company warns you not to contact your lender to avoid additional "fees." This should be a red flag. The company then does little or nothing, as you fall further behind in your payments. Usually, you realize you've been scammed when the company disappears, or stops taking your phone calls. But by then you have a much larger debt to worry about.
  2. The scam artist convinces you to sign over the title to your home promising to sell the property back to you in six months. During that time, you rent the property. Then, the scammer claims to be reducing the debt owed to your lender. In reality, however, the scammer doesn't make the mortgage payments, instead they strip the equity from the property. In other words, the scammer borrows against the home's equity for repairs that are never made, or may charge excessive fees against the property's value.1 Worse yet, the scammer may sell the property to someone else, escaping with the funds and leaving you with nothing.
  3. The scam company convinces you that they can work with your lender to save the home. The company then has you sign massive amounts of paperwork. The documents may include a transfer of the home's title to the company. In the paperwork, you may be completely unaware that you have signed their title over to the scammer. Like the previous scam, the company then strips the equity from the property, or sells it to someone else.

What You Can Do

The success of these scams depends on a homeowner's desperation. The homeowner stops communicating with the lender. He signs paperwork that he does not understand. And he puts his trust in a company about which he may have no real knowledge.

Real help is available to the consumer who needs it. Lenders may be willing to work with consumers falling behind on their mortgage payments. The homeowner should always contact his lender first, to see what kind of help is available. In addition, the Web site Making Home Affordable and the Homeowner's HOPE Hotline at 1-888-995-HOPE both provide access to free foreclosure counseling. Organizations such as the Department of Housing and Urban Development or the Federal Housing Administration also have lists of resources available to homeowners. These resources can include referrals to valid companies that can help you work out a solution to the foreclosure, or reduce your debt.

Never rely upon a postcard or mailing to save your home from foreclosure. Instead, find and use the many valid resources that are available. Doing so will ensure you're not another scam victim.


1Les Christie, Foreclosure Fallout: Rescue Scams,, August 8, 2007,, accessed May 18, 2009

Questions for Your Attorney

  • How can I check out a company offering foreclosure assistance services to see if it's legitmate?
  • Are there limits on what a legitimate company can charge for foreclosure or distressed mortgage assistance?
  • Can you review the proposals and related documents from a company offering mortgage or foreclosure relief assistance before I commit to anything?
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