The rate of home foreclosures may be slowing, but that doesn’t mean the number of scam artists looking to take advantage of vulnerable homeowners is also fading.

If claims from a company touting it can prevent a foreclosure seem too good to be true, chances are, it is. Knowing how the fraudsters operate will help you avoid falling victim to a foreclosure scam.

Maybe you’ve seen a flier in the mail, heard an ad blasted on the radio, or checked out a brochure stuck under your car’s windshield from mortgage companies claiming to stop your home from being seized or   offering generous loan modifications—but take heed, many companies are preying on vulnerable consumers.

According to the Federal Trade Commission, the missives are not only deceptive, but are designed to get your attention--and eventually your money--without following through on promises and often leaving you in a worse position than before.

Phantom Help Scam

A common foreclosure scam is what the FTC calls the “Phony Counseling or Phantom Help” scam. In this case, the fraudster asks you to pay a fee and in return they’ll get your lender to cut your mortgage payments or stop foreclosure proceedings.

In some instances, they will tell you to cut off all contact with your mortgage company, lawyer and credit counselor. More brazen scammers will even have you make your mortgage payment to them instead of the bank. In the end, the FTC says they will disappear, along with your money--putting you even more behind in your mortgage payments. 

Rent to Buy Scam

The “Rent to Buy” scam involves fraudsters to get you to sign over the title to your home as part of a deal that lets you rent your home with the option to buy it back later. But, according to the FTC, the terms of the deal are so high that it’s impossible to buy back your home.

In another variation, the scammer raises the rent over time to a point where you can’t afford it and then evicts you. The fraudster then turns around and sells the home, pocketing the profit.

Scammers can also promise to find a buyer for your home, but only if you sign the deed over to them and move out. While they say they will share the proceeds of the sale, they actually rent out the house and let the foreclosure process continue to happen. The scammers end up making money on the rent until the house is foreclosed on—leaving you with nothing.

Bait And Switch Scam

Sometimes preventing a foreclosure will require you to sign voluminous amounts of documents and forms. At least that’s what the scam artist wants you to believe. Buried in that pile of paperwork will be a document that signs your house over to the fraudster. You’ll think you are saving your home when in reality you just unwittingly signed it over.

To avoid falling victim to mortgage-relief scams, the Federal Reserve suggests homeowners should only deal with non-profit, HUD-approved foreclosure counselors and should avoid paying hundreds or thousands of dollars for help. In fact, most HUD-approved housing counselors don’t charge anything for counseling services.

A company guaranteeing to stop a foreclosure proceeding should send up a red flag that something is  amiss. According to the Fed, working with a legitimate counselor can increase the chances you’ll keep your home--but there are no guarantees.

 Finally, read and understand every paper before giving it your John Hancock, and ask for help with anything you don’t understand. Don’t sign any blank forms or let the company fill them out for you. Scammers are preying on your desperation and vulnerability, so think before you act.

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