When the Wolf Is at the Door

Foreclosure 'rescue' plans that can cost people their homes are proliferating, according to the National Consumer Law Center. Here is more from the center on what these operations are, how they work and ways that homeowners can protect themselves.

· "Phantom help," where the "rescuer charges outrageous fees, either for light-duty phone calls and paperwork the homeowner could have easily 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.

· The "bailout" that never quite works. This includes various schemes where homeowners surrender title to the house thinking that they will be able to remain as renters and buy back over the next few years. Sometimes homeowners are told that they have to give up 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.

· The "bait-and-switch," where homeowners don't realize that they're signing away ownership. The homeowners often think they're signing documents for a new loan to make the mortgage current. These cases often involve fraud and forged documents. And, worse, in many cases, the original homeowners are frequently left holding the mortgage on a home they no longer own.

How They Work

Here's an outline of how "rescue" scams often work, according to the center.

· A rescuer finds distressed homeowners through public foreclosure notices in newspapers or government offices. It's easier these days 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 is 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. But the homeowners often cannot claim in Landlord-Tenant Court that there was fraud.

Why They Work

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

· Saturation marketing , using lies, exaggerations and pressure.