Foreclosure Rescue Scams—What You Need to Know

For the many homeowners who are finding themselves defaulting on their mortgages or unable to make payments on their homes, foreclosure is becoming a sober reality. The vulnerability and seeming desperation that can accompany foreclosure leaves the door wide open for some of the newest scams sweeping the nation-Foreclosure Rescue Scams.


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Foreclosure scammers can be particularly treacherous, since they propose solutions to foreclosure that seem-at first-helpful and welcome. But, as too many families facing foreclosure know, the hope inspired by these "solutions" is short-lived.

Here are some of the most popular forms Foreclosure Rescue Scams are taking:

  • Bait and Switch: In this scam, the "rescuer" has the homeowners sign documents which will supposedly allow them to pay back missed mortgage payments, and stop foreclosure. In reality, the forms give ownership to the "rescuer." Sometimes, the "rescuer" then acts as an overbearing landlord, demanding high rent and evicting the former homeowners when they cannot pay. This means the homeowners lose not only the house, but also thousands of dollars of equity.
  • Sale/Leaseback (or "Bailout"): The "rescuer" convinces the homeowners to sign over ownership of the home, with the understanding that, while the "rescuer" owns the home, the homeowners can rent it until their financial situation improves. In reality, the "rescuer" will not return ownership of the home, will demand unreasonable rent payments, and will evict the former owners when they are unable to pay.
  • The Foreclosure Consultant (or "Phantom Help"): Here, the "rescuer" poses as a foreclosure consultant who promises to help the families facing foreclosure. The "rescuer" then charges enormous fees to do little or no work. This usually means that, in addition to not avoiding foreclosure, homeowners are left with more debt-the fees charged by the "rescuer."

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