Consumer advocates around the country are begging states for new laws to help fight a rising tide of complaints about foreclosure "rescue"...

Share story

WASHINGTON — Consumer advocates around the country are begging states for new laws to help fight a rising tide of complaints about foreclosure “rescue” scams, but homeowners can do a lot to protect themselves.

The Boston-based National Consumer Law Center, which this week issued a comprehensive report on “the rampant theft of Americans’ homes and equity” by con artists who promise to save houses from foreclosure, offers advice on how to avoid getting snared.

Prevention is the best medicine, they say, primarily because if a homeowner falls into a scam’s clutches, it will take considerable money and time, a good lawyer and sometimes help from state regulators or prosecutors to undo the damage.

While fraud and forgery may be involved, and other unfair-trade or deceptive-practices laws may have been violated, state enforcement agencies often do not have the resources to help “or don’t think they have the authority,” said Elizabeth Renuart, a co-author of the report. In most states, she said, “they don’t have the ability to save the house even if you prosecute. That’s a civil issue.”

The first advice is to ignore the posters offering foreclosure help that have been slapped up on telephone poles, in median strips and at bus stops in many working-class neighborhoods, says the report.

Ignore fliers dropped off on front porches or stuffed in mailboxes. Particularly ignore hand-written notes suggesting the “help” is coming from someone you know or who has your interests in mind.

“These kinds of signs crowd the streets in Virginia, Maryland, Florida” and other states where rescue scams are exploding, co-author Steve Tripoli said at a news conference in Washington in late May. “If the street signs don’t get you, the fliers will.”

How to help yourself

Facing foreclosure? Here’s what to do:

Don’t panic. Figure out where you are in the process. Are you behind on payments and getting a “deficiency notice,” meaning you can “cure” the debt? Or did you get notice of an immediate sale?

Talk to your lender. You might be able to restructure the payments or refinance your loan.

Find out the rules in your state. Also find out how much time you have to resolve problems before losing the home. This may require the help of a housing counseling agency or a lawyer.

Contact a counseling agency. Find one certified by the Department of Housing and Urban Development. A list of agencies by state is at

Call a lawyer. Find one through the National Association of Consumer Advocates Web site (, Legal Services (for low-income individuals; for lists of state programs), or your local consumer-protection agency. (Warning: Knowledgeable consumer attorneys are hard to find and are swamped.)

Never sign a contact under pressure.

Never sign away ownership of the property, a document often referred to as a “quit claim deed,” to anyone without the advice of your lawyer. Be especially suspicious of deals that claim to let you lease the property and buy it back after two or three years.

Don’t make payments to anyone other than the lender even if that person promises to pass them on to the mortgage company. If you can’t pay the mortgage, don’t ignore warning letters from your bank or lender.

Beware of any home-sale contract where you aren’t formally released from your existing mortgage.

Never make an oral agreement; get it all in writing with full copies of everything signed.

Don’t sign anything with blank lines or spaces; information could be added later.

If you don’t speak English, use your own translator. Do not depend on someone the rescuer or their associates provide.

Beware of those who offer to pay your arrearage and take the house off your hands in trade for papers assigning them the surplus from the foreclosure sale. Houses can and do sell for a profit at foreclosure sales in hot real-estate markets.

If you can’t get out of your jam, you might have to sell to pay off the mortgage. But even if you have to become a renter again, if you sell on the open market, you can have the money from the equity.

Source: National Consumer Law Center

They’re also turning up in Western Washington. “We hear a lot of stories from people who are getting lots of things in the mail, getting things dropped off on their doorstep,” said Erin Rearden, a housing counselor for the nonprofit Fremont Public Association, which aids homeowners in danger of foreclosure.

Common scam types

Phantom help:

The “rescuer charges outrageous fees, either for light-duty phone calls and paperwork the homeowner could easily have done or for a promise of robust representation for the homeowner that never materializes.” The homeowner ends up without enough help to save the house and with little or no time to stop the foreclosure.


This includes various schemes where homeowners surrender the title to the house thinking that they will be able to remain as renters and buy the house back. Sometimes homeowners are told they have to give up the title so someone with better credit can get a new loan to stop the foreclosure. But the terms of the deal are so onerous that the homeowner can’t buy back the house and the “rescuers” get all or most of the equity.

Bait and switch: Homeowners don’t realize that they’re signing away ownership. They often think they’re signing documents for a new loan to make the mortgage current. These cases often involve fraud and forged documents. And in many cases, the original homeowners are frequently left holding the mortgage on a home they no longer own.

Source: National Consumer Law Center

Rearden says the offers seem to be increasing. And they usually sound too good to be true — a tip-off to professional housing counselors that the offers aren’t legit. But some owners facing the loss of their home take the bait anyway because “they’re so in despair that they’ll take anything they think is going to help them,” Rearden said.

“Rescue” scams

Here’s a look at how “rescue” scams often work, according to the center.

A rescuer finds homeowners through public-foreclosure notices in newspapers or government offices. It’s easy because lists are computerized and companies compile and sell them. The homeowner usually doesn’t know about the notice.

The rescuer calls, visits or drops a business card or a flier at the door, or advertises with signs in distressed neighborhoods. The initial message is: “Stop foreclosure with just one phone call,” “I’d like to $ buy $ your house,” “You have options” or “Do you need instant debt relief and CASH?”

The first meetings promise a “fresh start” and often include “testimonials.” While the programs could work for some, the rescuer doesn’t note that the price can be steep.

Homeowners are often told to cease all contact with lawyers or the mortgage lender and to let the rescuer handle negotiations.

When it’s too late to stop the foreclosure, the property is either taken by the rescuer or sold to someone else at foreclosure. There’s not much equity left because of the consultant’s high fees.

Homeowners who have been turned into renters can be evicted from the homes they once owned.

These are some of the tactics and conditions that the schemes rely on:

Saturation marketing, lies, exaggeration and pressure.

Homeowners’ belief that someone would not lie to their face.

Fraud and deception, including but not limited to forgeries, piles of complex documents that mask the equity-stripping, and papers that conveniently run out of space for signatures after text — meaning the homeowner signs a blank page that can be fraudulently connected to an entirely different document.

Homeowners’ desperation, either to save their house or get cash.

Affinity marketing, where African Americans market to African Americans, Christians to Christians, older folks to older folks, Spanish-speaking to Spanish-speaking, military to military. The idea is that people like you are on your side and are protecting you.

Homeowners’ lack of economic sophistication, which leads them to fall for extremely high fees.

Source: National Consumer Law Center

Con artists use an arsenal of tools to reel in homeowners. They try to rush them into making a decision. They work to gain their trust by saying “we’ve been in the same dilemma,” Tripoli said.

They promote themselves as religious and their help as faith-based. How much trust should homeowners put in this approach?

“Zero,” said A. Linda Taylor, housing director of The Urban League of Metropolitan Seattle. “Do your homework.”

They also make a lot of empty promises — like they’ll sell the house back to the homeowner at some point. “We’ve never seen that in writing,” Taylor said, and owners don’t get their homes back.

Still, for whatever reason, many victims don’t realize they’ve been scammed, she said.

But Renuart is blunt about what’s transpiring: “These are felonies. This is grand theft of your house.”

Scams called rampant

The center’s report says foreclosure scams are “rampant,” particularly in hot housing markets where homes can be worth much more than desperate homeowners realize and where scam artists can essentially “buy” a property by paying off the amount that is overdue on a loan.

While the rescue “specialist” may promise to rent the house to the homeowner, with the opportunity for the family to buy it back later, the rescuer typically sets the price higher than the financially strapped homeowners can afford. Then he moves to evict them when they fall short on monthly “rent” payments.

Many times the underlying mortgage is not paid off, so homeowners not only are evicted but also still owe on the original loan amount.

Tripoli said homeowners in financial trouble should “do the exact opposite of what these scam artists say to do.”

“They tell you, ‘Do not talk to an attorney or to a lender,’ ” he said. “But if you’re caught in a foreclosure, you need to talk to your lender — to ask, ‘What can we do about restructuring payments or refinancing?’ “

Know state rules

Homeowners need to understand foreclosure rules in their state and where they are in the process.

For example, a homeowner should check to see if a letter from a lender is a deficiency notice, which says the homeowner is behind in payments to the lender and can still take care of the deficiency by paying it off, Tripoli said. That is opposed to a letter that announces a sale date, which means the homeowner is subject to a variety of fees beyond the amount in arrears.

In hot markets, there can be time before the sale not only to work out a new repayment schedule with the lender, what is called a loss-mitigation plan, but even to sell and make a profit, said Marla Webb, a senior adviser to, an online foreclosure listing service.

Consumer groups note that selling the house may be the only option for some because minorities and the elderly have often been targeted for predatory loans with high fees and terms and for multiple refinances that drained their equity. Although they may not want to move, selling on the open market will save them from their supposed rescuers, say consumer advocates.

Before taking that step, Rearden suggests they seek out housing counseling. But they have to be careful where they go, because some counseling is just another scam aimed at separating the already financially strapped homeowner from scarce cash.

“If you pay $1,000 for services, that’s money that could be going to the mortgage,” Rearden said. “You shouldn’t have to pay for housing counseling services.”

Indeed, said Taylor of the Urban League, “the majority of legitimate housing counseling is free.”

Legitimate services are certified by the Department of Housing and Urban Development. A list of them is available on its Web site (

Two in the Seattle area are the Fremont Public Association (206-694-6766) and the Urban League of Metropolitan Seattle, which hosts a mortgage default group meeting each Wednesday. (For more information call 206-461-3792 Ext. 3004.)

Homeowners who have been taken by rescue scams can also try to find a consumer lawyer to represent them in actions before enforcement agencies, in hearings on subsequent evictions by the rescuer or an investor, or in lawsuits alleging fraud or deception.

But knowledgeable lawyers are few, and homeowners in distress often cannot afford them, consumer groups say. The cases are so complicated that it takes more time than many lawyers want to spend.

Tripoli recommends retaining a lawyer through the National Association of Consumer Advocates (, which lists consumer lawyers by state. People who cannot afford a lawyer can try contacting the local Legal Services office, he said.

But Ira Rheingold, executive director of the consumer advocates group, said, “The fact is that there are not many attorneys who do these cases.”

Other possibilities for help include local consumer-protection offices.

If homeowners believe criminal activity is involved, they can call the prosecutor’s office, Tripoli said.

“That can put a chill on the activity and maybe buy you some time,” he said.

But the report notes that state enforcement agencies may not be able to help save the home.

“While most state criminal prosecutors possess a few tools to fight these scams today, they may lack the resources to tackle the scammers and hold them responsible,” the report said.

Seattle Times reporter Elizabeth Rhodes contributed to this article