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As the number of foreclosures grows, many thievesare swindling money from homeowners by preyingupon fears of losing a home. The FBI is describingmortgage fraud as one of the fastest-growing white-collar crimes in America, prompting the FederalTrade Commission, or “FTC,” to issue new rules toprotect homeowners. These scams are robbingthousands of families of not just their homes, buttheir life savings. If you are seeking help from“foreclosure consultants,” “mortgage consultants,”“foreclosure services,” “foreclosure rescue agencies,”or “loan modification companies,” beware! Armyourself with information that will help you separatelegitimate organizations from criminals. Thisknowledge will help you protect your home—andprotect your family.

Types of Scams

Lease-Back or Repurchase Scams – Companies willpromise to pay off your delinquent mortgage, repair yourcredit, and possibly pay off credit cards and other debt.However, in exchange, they require you to sign a deed(sometimes referred to as a quitclaim deed) “temporarily”transferring your house to a “third-party investor.” You willbe told that you can you stay in your home as a renter andbuy your home back when your financial situationimproves. The scam: Signing away your house gives thescammer control of your house. After you sign the deedto your house, the “temporary” new owner can evict youor take out a new mortgage on your home. That newmortgage can make it impossible for you to buy back yourhouse. And once you sign away your home, the“temporary” owner doesn’t have to let you buy it back—even if you can and want to.

Refinance Scams – There are legitimate refinancingprograms, but beware of people posing as mortgagebrokers or lenders who offer to refinance your loan so youcan afford the payments. The scam: The scammer hasyou sign a “foreclosure rescue” loan document that isactually a deed-transfer document.He tells you that thedocuments are for a refinance loan that will bring themortgage current. But hidden in the fine print is languagethat gives away ownership of your home—the “loandocuments” actually transfer your deed (sometimes

referred to as a quitclaim deed) to the scammer. Once thedeed is transferred, you might receive an eviction notice.At that point, it is often too late to do anything about thedeed transfer and you have lost your home.

Partial-Interest Bankruptcy Scams – Companies willpromise to save your home from foreclosure if you (1) givea partial interest in your home to one or more persons and(2) make mortgage payments to the company instead of toyour mortgage lender. The scam: The scammer keepsyour money instead of using it to pay your mortgage.Instead, each person who holds a partial interest in yourhome files bankruptcy, one after the other. Every newbankruptcy causes the bankruptcy court to issue a “stay”order that stops foreclosure temporarily. But these staysdon’t forgive your mortgage or let you stop makingmortgage payments. Because the scammers keep yourmoney instead of paying the mortgage company, you fallfurther behind in what you owe to the mortgage companyeven though you think you are making timely paymentson your mortgage. Once the bankruptcy stay orders runout, you are now even further behind on your mortgage,and you have lost all the money that you paid to thescammers. Any time you stop making payments on yourmortgage, you could lose your home or damage yourcredit rating. A new FTC rule requires that a company tellyou of this any time that company recommends that youstop paying your mortgage.

Internet and Phone Scams – Some scam lendersconvince you to apply for a low-interest mortgage on thephone or over the Internet. Your “application” will beimmediately approved and the companies will ask that yousend them your Social Security number, bank-accountnumbers, and other financial information. The scam: Thescammer just wants to steal your identity or drain yourbank accounts. You have lost control of your privateinformation, and possibly been robbed of your money.And, sadly, your home is still at risk of foreclosure.

Phantom Help Scams – Companies falsely claiming to beaffiliated with government and government housingassistance programs will claim that they will negotiate witha mortgage lender or servicer to obtain a government loanmodification, short sale, or other relief from foreclosure in

exchange for a fee. The scam: The scammer runs off withyour up-front fee or charges outrageous fees forperforming light paperwork or making occasionalphone calls that you could have easily made yourself. Inthe end, you are worse off than before. If the scammer’s“help” doesn’t get your mortgage modified or refinanced,you might be left with no time to save your home or gethelp from a legitimate service.

Red Flags

Potential signs of a loan scam:

Someone asks for a fee in advance to work with yourlender to modify, refinance, or reinstate yourmortgage. No legitimate organization that works withborrowers to avoid foreclosure will ever ask for moneyup front. It may pocket your money and do little ornothing to help you save your home from foreclosure.The FTC prohibits a loan-modification service fromcollecting a fee until you have signed an agreement withyour mortgage lender or servicer to modify yourmortgage.

Someone guarantees that he can stop a foreclosure orget your loan modified. Because every borrower, everyloan, and every mortgage company are different, nobodycan guarantee that your foreclosure will be stopped orthat your loan will be modified. Legitimate, trustworthy,counseling agencies approved by the Department ofHousing & Urban Development, or “HUD,” willpromise only that they will try their very best to helpyou. If someone guarantees that your loan will bemodified if you pay a fee, watch out!

Someone advises you to stop paying your mortgagecompany and pay someone else instead. Despite whata scammer will tell you, never send a mortgage paymentto anyone other than your mortgage lender. The minuteyou have trouble making your monthly payment,contact your mortgage lender. Also watch out forcompanies that recommend that you cut off contactwith your lender or with counselors who may have beenhelping you.

Someone pressures you to sign over the deed to yourhome or sign paperwork that you haven’t had achance to read and fully understand. A legitimatecounselor would never pressure you to sign a documentbefore you had a chance to read and understand it. Don’tbelieve promises that aren’t put in writing, and makesure not to sign a document that has blank lines orspaces.

Someone claims to offer “government-approved” or“official government” loan modifications. Thesepeople may be scam artists posing as legitimateorganizations approved by, or affiliated with, thegovernment. Contact your mortgage lender first. Yourlender can tell you whether you qualify for governmentprograms to prevent foreclosure. And, remember, youdon’t have to pay to benefit from government-backedloan-modification programs.

Someone you don’t know asks you to release personalfinancial information online or over the phone. Youshould give this type of information only to companiesthat you know and trust, like your mortgage lender or aHUD-approved counseling agency.

Self Help

To protect yourself from getting scammed, the first stepis to contact your lender or mortgage-loan servicer andtry to negotiate a payment plan. If that doesn’t work,make sure to work with reputable non-profit housing orfinancial counselors by contacting your local BetterBusiness Bureau or the Texas Attorney General’s office tosee if the company or organization is legitimate and ifother homeowners have complained about it. The TexasAttorney General’s office has a list of alleged scammersat www.oag.state.tx.us/consumer/mortgage_fraud.shtml.

Make sure to review nationwide scam reports. You cando this at the Prevent Loan Scams website, a project ofthe Lawyers’ Committee for Civil Rights Under Law, atwww.preventloanscams.org/.

If you think you’ve been a victim of a scam, you can alsohire a lawyer to contact the company. A lawyer may beable to get your money back by writing a demand letteror by making a phone call. It may be too late to get backany money paid to the scammer or to get back yourownership interest in your home. Everyone’s situationis different, so contact a local lawyer to determinewhat your options are.

If you can’t obtain a lawyer, consider representing yourselfin small claims court. Small claims court is the real“People’s Court.” Small claims courts provide aninformal, uncomplicated proceeding to resolve smalldisputes that don’t involve enough money to warrant theexpense of formal litigation. The Texas Young LawyersAssociation’s How to Sue in Small Claims Courtpublication provides an overview of the general processused to file, obtain judgment, and collect a small claimscourt judgment. The general overview in the TYLA guideshould never be used exclusively – readers should alsoconsult their local court for court-specific rules orprocedures.

For an online version of the publication, go towww.tyla.org/tasks/sites/default/assets/File/37322HowToSueInSmallClaims_2010.pdf. To request a print copyof the pamphlet, please contact Tracy Brown, P.O. Box12487, Capitol Station, Austin, Texas 78711-2487, orcall (800) 204-2222 ext. 1529.

Report the Scammers

When people know what types of activities are scams,scammers can’t make money, and their scams stop. Yourhelp in reporting attempted scams is essential toprotecting yourself and other homeowners from thesecriminals. Always report suspicious activity by calling 1-888-995-HOPE or submitting a claim online at http://complaint.preventloanscams.org/. Your call couldbe the one that allows authorities to catch predators whoare harming or attempting to harm homeowners. Reportthe scam even if you get your money back—you couldput scammers out of business and prevent them frommaking victims of your family or friends.

Other Ways to Report Foreclosure Scams

• Federal Trade Commissionwww.ftccomplaintassistant.gov/ orwww.ftc.gov/bcp/menus/consumer/credit/mortgage.shtm(877) FTC-HELP or (877) 382-4357

• Office of the Texas Attorney GeneralConsumer Protection DepartmentPO Box 12548Austin, TX 78711-2548512-463-2100Toll free: 1-800-621-0508www.oag.state.tx.usSee the website for regional and county offices nearestyou.

• Federal Bureau of Investigation Contact information for local offices can be found atwww.fbi.gov/contactus.htm.

F o r A d d i t i o n a l C o p i e s P l e a s e C o n t a c t :

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Get Free Help

1-888-995-HOPEBy dialing the toll-free number, you will be able to receive free,personalized advice from HUD-certified housing counselingagencies.

Guide to Free Counseling and Legal Aid Services Acrossthe Statehttp://www.preventloanscams.org/states?id=0043

Government-sponsored Mortgage Modification andRefinance Programs

• Making Home Affordablewww.makinghomeaffordable.gov/

• HOPE for Homeowners (H4H)portal.hud.gov/(800) CALL-FHA or (800) 225-5342

Foreclosure Mitigation Assistance and Counseling

• FDIC Foreclosure Prevention Websitewww.fdic.gov/foreclosureprevention(877) ASKFDIC or (877) 275-3342

• U.S. Department of Housing and Urban Developmentwww. hud.gov/offices/hsg/sfh/hcc/fc/ or www.hud.gov(800) 569-4287

• Homeownership Preservation Foundationwww.995hope.org(888) 995-HOPE

• NeighborWorks Americawww.findaforeclosurecounselor.org/or www.nw.org/network/home.asp

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