Some homeowners facing foreclosure are being subjected to scams that ultimately could cost them tens of thousands of dollars, New Jersey Attorney General Stuart Rabner warns.

As foreclosure filing rates are increasing nationally, scams targeting homeowners facing foreclosure are rising as well. These scams typically target "surplus funds" to which homeowners may be entitled if their homes are sold at a sheriff's sale.

"Homeowners facing the loss of their homes are understandably concerned, and con artists seize on their fears to perpetrate scams," Rabner noted. "These offers of help and money may seem like a godsend, but it is the con artist who ultimately benefits."

Surplus funds are the monies remaining after the sheriff's foreclosure sale takes place and mortgage and tax obligations have been paid. Neither the homeowner's mortgage lender nor the sheriff's office are required to notify the homeowner if surplus funds exist.

The state's Division of Consumer Affairs is alerting the public to two surplus fund scams.

In the first scam, the con artist offers to accept the property deed and, in exchange, pay the homeowner a minimal amount of money, typically no more than a few thousand dollars. By transferring the deed, the homeowner signs away ownership of his or her house and any equity that has built up.

The homeowner may be told he can buy the deed back if certain conditions are met. Many times, however, these conditions are almost impossible to satisfy or the scammer never intends to honor his promise. Instead, the house is sold through a sheriff's foreclosure sale and the con artist keeps the surplus funds that result.

In the second scam, the con artist offers to assist the homeowner in obtaining surplus funds that may be available after the house is sold via a sheriff's foreclosure sale. The homeowner often times is told that he cannot apply for surplus fund on his or her own, or that the process is very complicated or costly.

The con artist scams the homeowner by:

• charging an exorbitant fee that can range up to 75% of the total surplus fund;
• writing a fee in the contract with the homeowner that is higher than the fee verbally promised;
• pressuring the homeowner to sign away his/rights to the surplus funds through a quit claim deed; and
• forging the homeowner's name on a surplus funds application and then keeping the surplus funds.

In reality, homeowners in New Jersey can obtain the surplus funds by filing a simple form and paying less than $100. The process is similar in other states.

"These scams have the same goal: to enrich the con artist by taking money from a homeowner in trouble," Acting Director Nolan said. "It is unconscionable that con artists take advantage of good people who have fallen on hard times. We are working to educate and protect those facing foreclosure from these scams."