The U.S. Government Accountability Office (GAO) released a report in July 2010 entitled “Home Ownership
Preservation”. It says: “The current foreclosure crisis has provided persons who may perpetrate mortgage
foreclosure rescue and loan modification schemes with unprecedented opportunities to profit from homeowners
desperate to save their homes. In March 2010, we reported that national default and foreclosure rates rose
sharply from 2005 through 2009, to the highest level in 29 years. The most recent data from the Mortgage
Bankers Association, which are for the first quarter of 2010, show that the number of home loans with
payments more than 60 days past due, and therefore potentially facing foreclosure, is 2.7 million.”
The GAO report says there are two main types of foreclosure rescue and loan modification scams: advance-fee
loan modification schemes and sales-leaseback schemes, with advance-fee schemes being the most common. In an
advance-fee scheme, someone charges you a fee in advance to negotiate a deal with your mortgage lender. They
may even offer a money-back guarantee. But the usual outcome is that they take your money (the average is
about $3,000), provide little or no service, and then refuse to refund the fee. In a sales-leaseback scheme,
the scammer persuades you to transfer your deed to them by offering to assume your payments and let you pay
rent while you get your affairs in order. They promise to sell the property back to you once your financial
situation improves, but, of course, they don’t. Often they take out another loan on the home or even sell it
out from under you.
