What is Foreclosure Rescue Scam?

What’s a Foreclosure “Rescue” Scam?

These scams revolve around heavily-promoted deals supposedly designed to save the homes of people facing foreclosure, those who’ve fallen behind on their mortgage payments. But with frightening regularity this “help” from a “rescuer” either drains off the property’s built-up

equity or leaves the “rescuer” owning the house outright – and the family evicted from their home.


Phantom Help:

The predominant foreclosure “rescue” scams appear to come in three varieties. The first might be called “phantom help,” where the “rescuer” charges outrageous fees either for light-duty phone calls and paperwork the homeowner could have easily performed, or on a promise of more robust representation that never materializes. In either event the homeowner is usually left without enough assistance to actually save the home but with little or no time left to prevent this grievous loss by the time s/he realizes it. The “rescuer” essentially abandons the homeowner to a fate that might well have been prevented with better intervention.


Bailout Scam:

This scenario includes various schemes under which the homeowner surrenders title to the house in the belief that s/he is entering a deal where s/he’ll be able to remain as a renter, and buy it back over the next few years.


Homeowners are sometimes told that surrendering title is necessary so that someone with a better credit rating can secure new financing to prevent the loss of the home. But the terms of these deals are almost invariably so onerous that the buyback becomes impossible, the homeowner permanently loses possession, and the “rescuers” walk off with all or most of the home’s equity.



The third variety is a bait-and-switch where the homeowner does not realize s/he is surrendering ownership of the house in exchange for a “rescue.” Many homeowners later insist that they believed they were only signing documents for a new loan to make the mortgage current.

It’s important to note here that a substantial number of these cases involve fraud and forgeries of deeds. Worse, in many cases the original homeowner is left holding the original mortgage on the home s/he no longer owns!


         The “rescuer” identifies distressed homeowners through public foreclosure notices in newspapers or at government offices. These records are more readily accessible than in the past because they’re computerized and because more private firms now compile and sell the lists. The homeowner has not been foreclosed on yet, but is merely threatened with foreclosure after falling behind on mortgage payments.


         The “rescuer” then contacts the homeowner by phone, personal visit, card or flyer

left at the door (see examples of these solicitations in  Appendix A), or advertising.

Initial contact typically revolves around a simple message such as “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?” This contact also frequently contains a “time is of the essence” theme, adding a note of urgency to what is already a stressful and possibly desperate situation.

         Initial meetings stress the promise of a “fresh start” – likely what a frightened homeowner most wants to hear – and often feature written or recorded

“testimonials” from other homeowners the “rescue” scammer has supposedly saved.

While it is true that these programs “work” for some, what’s glossed over is that even that help often comes at a very steep price.

         Homeowners are also frequently instructed to cease all contact with lawyers or the mortgage lender and let the “rescuer” handle all negotiations.3 This doubly-devious tactic simultaneously cuts off access to possible re-financing options while running out the clock on ways to prevent the foreclosure.

         Once it’s too late to save the home the property is either taken by the “rescuer” or, having been drained of substantial equity through the “rescuer’s” imposition of heavy fees and other charges, simply lost to foreclosure.

         After things fall apart many homeowners suffer the added stress and indignity of being evicted by their “rescuer” from the home they once owned.

          Separately but also quite worrisome, this scam appears to have spawned a side industry

of scam artists who teach others how to drain equity from homes facing foreclosure.


These scam teachers often advertise their seminars under the rubric of buying real estate with no money down, cashing in on the so-called pre-foreclosure market, helping those in distress or some such. (parts of this article were taken from a Foreclosure article written in Consumer Law.Org)

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