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8/15/2008

Fort Worth, TX – It is estimated that approximately two million Americans are facing the possibility of foreclosure. Many homeowners—some with substantial equity in their homes—are facing foreclosure because they have fallen behind in their mortgage payments. With so many people suffering financial stress, scammers saw an opportunity in these developments. A number of foreclosure scams arose, ranging from the promise of non-existent new loans to phony bankruptcy claims. One of the most frequent foreclosure scams is called "equity stripping" or a "foreclosure rescue" scam. The homeowner facing foreclosure is typically offered cash up front, free rent, and a chance to retain their house over the long term. In return the scammer takes over the deed, borrows as much as possible against the house, and effectively pockets the equity that the homeowner has built up in the house. In another version of the scam, troubled homeowners are told that if they would sign over their property to the scammer, the scammer would invest the equity in their homes, enabling the homeowner to remain in the home and to own the home mortgage free in five years. To add to the tragedy of these scams, the homeowners typically not only lost their equity but usually their houses as well.

This type of activity is not automatically illegal. Foreclosure-rescue services might actually benefit some consumers facing foreclosure and the loss of their home and all of the equity built up in it. Abuse of the process, however, has led officials in some states to try to catch up with the scammers by enacting new legislation or regulations. The Attorney General of Texas has also been vigorously prosecuting foreclosure scams. Consumers should be extremely cautious in considering foreclosure-rescue services and should check with the BBB for a reliability report on any company that they are considering.