Stop! Don’t Fall for These “Mortgage Relief” Scams

By Carol Church, Writer, Family Album

Reviewed by Michael Gutter, PhD, Department of Family, Youth, and Community Sciences, University of Florida

“Avoid foreclosure—guaranteed!” “Government approved!” “90% of customers stay in their homes!” For people facing the frightening prospect of home foreclosure, promises like these can sound very tempting. Those in this situation may be overwhelmed, confused, and looking for any possible option to avoid the loss of their home and property.

A World of Frauds and Scams

Unfortunately, scam artists and unscrupulous businesspeople are waiting to take advantage of these vulnerable individuals. They may defraud homeowners of money, mislead them into signing over the title or deed to their homes, file bankruptcy in their names, and create more and worse financial problems than those that already exist. While such business practices are generally illegal, companies like this continue to operate, depriving hardworking Americans of their money and homes.

How to Protect Yourself

The Federal Trade Commission, the US Department of Housing and Urban Development, nonprofit organizations, and lenders like Fannie Mae and Freddie Mac are all working together to help combat this serious problem. The Loan Modification Scam Alert website has a great deal of useful information for homeowners who may be considering offers like these. Here are some common red flags to look out for:

  1. A “counselor” who asks for money upfront to help you forestall or prevent foreclosure. This is against the law. Companies may not charge you anything until you have a written offer in hand from your mortgage company offering you mortgage relief—and you have accepted that offer. The only exception is when you are working with a lawyer licensed to practice law in your state—but even then, you should be very cautious. Read more about lawyers here.
  2. A company that asks you to give up the title or deed to your home so that a more qualified buyer can purchase it and you can “rent to own” it or “lease it back.” These scammers may raise your rent so much you can’t pay it, or the new borrower may default on the loan—leaving you out on the curb.
  3. A company that offers to “negotiate” a short sale for you, usually while charging a fee. Short sales may be a viable option for some homeowners, but you should only work with a licensed real estate professional or attorney.
  4. A company that asks you to stop contacting or talking to your mortgage lender, telling you that they will “handle it” for you from now on. This is always suspect. It may mean that a scam artist is going to declare bankruptcy in your name—which will stop collection and foreclosure temporarily, but also leaves a serious black mark on your credit. In another scenario, the company claims to have special techniques to help you qualify for government or federal programs –after you pay them a fee, of course. Don’t fall for it! Instead, talk to your lender. They will know if you qualify for any special relief programs, and can tell you for free.
  5. A company that tries to pressure you into paying to join a “mass joinder lawsuit” to determine if your lender broke various laws. Although some such lawsuits are legitimate, you should not have to pay upfront to join them.
  6. A company that tells you it can conduct a “loan audit” to see if your loan was legally conducted. In theory, if it was not legal, you could then sue. There is no evidence that these procedures work to save homes from foreclosure.
  7. Other red flags include a company that asks you to stop paying your lender in favor of paying them instead; companies that pressure you into signing complicated papers you don’t understand; companies that “guarantee” that you won’t be foreclosed or the loan will be modified; or companies that ask you not to contact other people you want to work with, such as a housing counselor.

What Are My Safe Options?

So what can you do when your home is danger of foreclosure and you don’t know where to turn? The good news is that there are options out there that are safe, legal, and reasonable. Depending on your situation, you may be eligible for a true loan modification (changing the terms of your mortgage by working with your lender) or forbearance (a period of time when you do not make payments). In some situations, unfortunately, it may be best to sell your home or declare bankruptcy.

Whatever your choice, there are legitimate counselors available to assist you in making your decisions. Free counseling is available through HUD’s Housing Counseling Program and from the Homeowner Preservation Foundation. While foreclosure or the threat of foreclosure is always stressful, scam artists and unscrupulous businesspeople can make the situation even worse. Rely on known and reliable counselors and nonprofit organizations instead.

Further Reading:

Stop Loan Modification Scams

FTC: Mortgage Relief Scams

HUD: Avoiding Foreclosure

Hope Now: Support and Guidance for Homeowners


Federal Trade Commission. (2011). FTC’s Mortgage Assistance Relief Services Advance Fee Ban Takes Effect. Retrieved from

Federal Trade Commission. (2012). Mortgage relief scams. Retrieved from

Department of Housing and Urban Development. (n.d.) Avoiding foreclsoure. Retrieved from

Department of Housing and Urban Development. (n.d.) Stop loan modification scams. Retrieved from

Photo Credits: Terrance Emerson/iStock/Thinkstock


Posted: June 29, 2015

Category: Home Management, Money Matters, Work & Life
Tags: Budgeting, Family Resource Management, Housing, Personal And Family Finances

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