Beware of Ads that Promise to "Stop Foreclosure"

Newhouse News Service, March 9, 2008
by Ryan Frank

When a foreclosure starts, so do the sales pitches.

They come with a knock at the front door, a letter in the mailbox or a bright sign on the telephone pole.

"You'll lose your home if you don't call now!" Or "Sign here and we'll save your home!" Or "Stop foreclosure!"

But watch out for this last-ditch offer: a rescue from foreclosure.

Some foreclosure-rescue operations may be legitimate and their tactics may, in some cases, be legal. But consumer advocates say they haven't found any that they'd endorse.

"Every single one I've seen is bogus," said Richard Hagar, a Seattle-area real estate appraiser who trains police in how to spot scams.

At their core, most foreclosure-rescue schemes offer a false promise to save someone's home from foreclosure.

The schemes come in two basic flavors: a consultant who takes a fee, roughly $1,000, to negotiate with the lender, but does nothing; and a person who persuades an unsuspecting homeowner to sign over the title to the property.

"These people are selling hope," said Lauren Saunders, a lawyer with the Boston-based National Consumer Law Center. "They are telling people what they want to hear."

Foreclosure-rescue schemes have been around for years. But with the U.S. housing bust, they're booming now. The message spreads through Internet ads and traveling seminars selling get-rich-quick schemes for people to profit from foreclosure.

"The homeowners end up losing their homes to these people when there are legitimate solutions," said Verla Fuller, executive director at Open Door Counseling, a foreclosure adviser in Cornelius, Ore.

The U.S. Department of Housing and Urban Development says homeowners should steer clear of for-profit rescue services.

Instead, the government subsidizes housing counselors who provide the same services — for free or a low fee.

No law prohibits someone from persuading another person to sign over the title to a home. Police can make a theft case but only if the buyer lied about the conditions of the sale. That leaves a costly and long civil court battle.