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Mortgage Rescue Fraud Schemes On The Rise

Scam artists charge large upfront fees, often strip homeowners' equity

October 13, 2008

The tip-off that you're being scammed, she says, is when the company offering the "rescue" requires an upfront fee.

"While consumers are doing all that they can to save their homes from foreclosure, it is unconscionable that con artists would prey on their vulnerabilities with these so-called 'rescue' schemes," Madigan said.

Madigan said her office has learned that scam artists are contacting homeowners claiming to have the expertise and the connections to negotiate with mortgage lenders to reduce consumers' monthly payments and prevent foreclosure. These scam artists charge consumers up to $5,000 in upfront fees for homeownership counseling and mortgage rescue services but rarely produce successful results.

As part of these rescue schemes, con artists sometimes end up stripping the equity from a home by persuading homeowners to sign over the title of their houses and then make "rent payments" to the rescue fraud scammer.

The con artist typically promises to sign the home back over to the homeowner at a later date after the home value increases and/or the homeowner's credit is repaired.

Usually, the con artist is long gone before the victims realize they've lost both their homes and the large amount of equity that had been established in the time they owned the homes.

Madigan has brought lawsuits against 15 mortgage rescue fraud companies under Illinois' Mortgage Rescue Fraud Act, as well as the Consumer Fraud and Deceptive Business Practices Act.

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