Thousands of people each year fall victim to fraud that promises mortgage foreclosure prevention but leaves them with none of the equity they had built up in their home.

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The National Consumer Law Center says there are three common models of foreclosure fraud, and that it's a growing problem.

The number of foreclosures reported nationwide soared 42 percent in 2006 to 1.26 million. That creates opportunities for more foreclosure fraud, although the exact number of cases is difficult to determine because they are generally lumped in with other kinds of fraud in crime reports.

One couple thought they were taking out a $1,700 loan to help them pay the roughly $4,700 in back payments they owed on their mortgage. They learned too late they had signed their house over to Mid-America Financial Investment Corp. and agreed to lease their home from Mid-America when they accepted that loan.

Although the couple no longer owned their home, the mortgage remained in their names, so they made their $554 payments on the loan through Mid-America, along with monthly fees of at least $100.

A staff attorney at the National Consumer Law Center who co-wrote the report on foreclosure fraud, said such schemes are popular in areas of the country where home values have soared, but any homeowner who has been paying down a mortgage for many years will have significant equity and can become a target.

A second scheme described in the report involves consultants charging high fees to help homeowners out of trouble but never delivering the promised services.

A third involves an agreement in which a homeowner knowingly signs over the home and agrees to buy it back over time, but the terms of the agreement make it nearly impossible for the homeowner to succeed.

Eight states have adopted laws designed to help protect consumers from the questionable practices some foreclosure consultants use.

The laws vary, but generally all require the terms of these agreements to be spelled out in writing and offer homeowners a chance to cancel the agreements within a few days of signing them.

Renuart and groups that track foreclosures worry that many more Americans could fall victim to fraud because the number of adjustable-rate and interest-only mortgages taken out in recent years will likely contribute to a jump in the number of foreclosures when loan payments adjust upward.

RealtyTrac said 109,652 homes across the nation entered some stage of foreclosure in December, a nearly 9 percent drop from the previous month, but an increase of 35 percent from December 2005. The company reported a national foreclosure rate of one new foreclosure filing for every 1,055 U.S. households.

And the Center for Responsible Lending issued a report in December predicting 2.2 million foreclosures in the coming years among homeowners with so-called subprime loans, which are loans offered at rates higher than the prime rate and that are aimed at people with poor credit ratings.


Falling behind on your mortgage is bad. Losing ownership of your home to a company without even realizing it is worse.

That's an increasing problem nationwide. Officials say each year, thousands of Americans are falling for offers of help to avoid foreclosure. What they wind up doing is signing away ownership of their homes, while making payments on what becomes a lease.

The National Consumer Law Center is out with a report on what it says is the growing problem of foreclosure fraud.

Another common scheme it's finding involves high-fee consultants who never make good on the services they promise. There's also one in which homeowners knowingly sign over their house and agree to buy it back over time. Only the terms of the agreement make that all but impossible.

Tips to avoid foreclosure rescue scams:

- Try contacting the mortgage lender to work out a payment plan if you are having trouble meeting your mortgage.

- Don't sign any documents before reviewing them carefully.

- Be aware that signing any kind of deed, such as a warranty deed or quit claim deed, means you are selling your home.

- Contact a private attorney or housing counselor approved by the U.S. Department of Housing and Urban Development to help review any documents before signing. Information about foreclosure and approved housing counselors is available online at www.hud.gov/foreclosure or by phone at (800) 569-4287.

- Be suspicious of anyone who contacts you first or offers "bargain loans" or "easy credit."