* "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.
* 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 married 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-interest loans or gigantic fees for little work.
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 about how to restructure the payments or refinance.
* Find out how the foreclosure process works in your state and how much time you have to resolve problems before losing the home. Warning: To fully understand the process you may need the help of a housing counseling agency or a lawyer.
* Contact a counseling agency approved by the Department of Housing and Urban Development. A list of agencies by state is at www.hud.gov.
* Contact a lawyer through the National Association of Consumer Advocates Web site (www.naca.net), the Legal Services Corp. (for low-income individuals; www.lsc.gov for lists of state programs) or your city or county's consumer protection agency. (Warning: Knowledgeable consumer attorneys are hard to find and are swamped.)
* If you're older than 50 and a resident of the District, consider contacting AARP's Legal Counsel for the Elderly. (Warning: AARP is also swamped.)
* Never sign a contract 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 pay your mortgage 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 provides.
* 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 money you owe the lender. But even if you have to become a renter again, if you sell on the open market you get the built-up equity.