Foreclosure Scams

Unfortunately, scam artists often attempt to take advantage of people in vulnerable financial situations such as default or foreclosure. These unscrupulous actors prey on people while pretending to offer them assistance. Do not be fooled by these scams! If you seek assistance from a third party, make sure that it is a reputable counseling agency.

Mortgage Assistance Scams

Homeowners needing mortgage assistance are sometimes preyed upon by scam artists who charge up-front fees and fail to deliver on promises to save a home from foreclosure or to modify a borrower’s loan terms. No homeowner should pay fees up front for mortgage assistance. There are nonprofit organizations that provide mortgage assistance for free as part of their mission.


If you are a homeowner that has fallen behind on your mortgage payments, you are not alone. Millions of Americans face mortgage problems. If you are faced with rising adjustable mortgage rates, mortgage default, or foreclosure, arm yourself with information, get the right kind of help, and take decisive action to protect your interests.

Mortgage assistance scam artists charge people up-front fees and fail to deliver on promises to modify a borrower’s loan terms or save a home from foreclosure. No homeowner should pay up-front free for mortgage assistance because there are nonprofit organizations that provide such services for free. Below is a list of some scams:

  • Foreclosure Consultant Scams  Foreclosure consultant companies purport to help people save homes that are in foreclosure. Foreclosure consultant scam artists charge large, up-front fees for services such as financial advice, negotiating payments or other solutions with a lender, or exploring the sale of the property. In some cases, foreclosure consultant scam artists who collect up-front fees do not actually provide any of the promised services and disappear overnight.
  • Mortgage Modification Scams  Mortgage modification companies purport to help people modify the interest rate or other terms of their mortgages. Mortgage modification scam artists charge large, up-front fees and often fail to deliver on the promised services.
  • Forensic Loan Auditors  Forensic loan auditors purport to help homeowners discover violations of state and federal mortgage lending laws in the homeowner’s mortgage loan. These companies claim that these violations will provide the homeowner with “ammunition” to use against the lender to obtain a faster or more favorable mortgage modification or foreclosure relief. Forensic loan auditor scam artists charge hefty up-front fees for their services when there is no evidence to support their claims, and often fail to deliver any relief.
  • Equity Stripping Scams  This scam works in a variety of ways, but typically starts when someone promises to solve all the homeowner’s problems and keep him or her in the home. The scammer may promise loan money that never appears, or have the homeowner sign a lot of complicated papers. The scam artist may convince the homeowner to sign the property over to him or her, claiming that only he or she can get a loan to save the home. In reality, the loan does not exist, and the homeowners become renters in their own homes, until they are eventually forced out by the inevitable foreclosure. In most cases, the homeowners receive little or nothing for their home equity, which has, in essence, been stolen by the scam artist.
Refinancing Scams

Some homeowners look to refinancing to get out of adjustable-rate mortgages or lower the rate on their fixed-rate mortgages to help ease financial pressures. Refinancing can become an attractive option when interest rates drop. But be careful. Some homeowners have become the target of fraudulent refinancing offers.

The fraudulent offers may begin with a call from an “under-writer,” who may refer to the homeowner’s good payment record, good credit, or current mortgage rate to confuse the homeowner into believing that the call is from the homeowner’s current mortgage lender. The caller may offer the homeowner a refinancing offer that is hard to pass up, such as a lower interest rate, no closing costs, guaranteed approval, no required appraisal, and a speedy closing. Since people may believe that their current mortgage lender is offering the deal, they do not question the offer. After the caller convinces the homeowner to refinance, the homeowner is asked to pay a fee to proceed with the refinancing, which can be as high as two mortgage payments. Once the homeowner provides payment for the refinancing, the “under-writer” does nothing and the homeowner is out thousands of dollars.

These scams are hard to detect because the refinancing process can be confusing and vary from person to person. To avoid refinancing traps, the Attorney General’s Office offers the following tips:

  • Confirm the identity of the refinancer. If you suspect that your current lender is making the offer make sure to confirm this before proceeding with the transaction—especially if you are relying on the caller's affiliation with your current lender as a basis to agree to refinance. Fraudsters may make statements about your credit history, payment history or current interest rate to mislead you into believing that they are affiliated with your current bank.
  • Ask to see everything in writing before you agree to the refinancing terms.  You are entitled to receive a Truth-in-Lending Disclosure, which explains the cost of the refinancing, including the APR (annual percentage rate)and any fees. But be careful. The statement does not prevent the borrower from being overcharged. You should shop around to make sure you are getting the best loan.
  • Look for excessive fees.  Refinancing fees can be rolled into the loan and are easy to disguise. Unscrupulous lenders may offer you a great rate and no "out-of-pocket' expenses, while charging excessive fees that are financed through the loan. Fees are often based on your credit and financial profile and can vary from person to person.
  • Don’t feel pressured into accepting right away.  It is tempting to lock in immediately when offered a great rate with great terms, but rates may go up or down. Taking a day or two to consider the offer or research the company should not alter the refinance offer too drastically.
  • Be wary of “pre-approval.”  When someone tells you that you are “pre-approved,” it may not mean the refinancing is guaranteed. You may still have to go through the underwriting process for loan approval, including filling out the loan application, undergoing credit checks, income verification, and an appraisal. Make sure you clarify what the caller means by being “approved” for the loan, especially if you are agreeing to the refinance based on being approved. You may still be denied later despite your “pre-approval.”
  • Don’t agree to or sign anything that is contrary to what you were promised.  Many consumers find themselves agreeing to an arrangement in writing or in a recording that is different from the offer given to them. It is difficult to dispute an unauthorized charge if there is a contract or recording that shows you agreed to the arrangement.
Common Loan Modification Scams

Get akamai and know about what kind of loan modifications are fake.

Loan modifications are changing every day. Here are some of the most common loan modification scams out there today.

Phony Counseling or Foreclosure Rescue Scams
The scam artist poses as a counselor and tells you he can negotiate a deal with your lender to modify your loan or save your house—if you pay him a fee first. The fee may be called a processing fee or administrative fee. He may even tell you not to contact your lender, lawyer or housing counselor—that he'll handle all details. He may even insist that you make all mortgage payments directly to him while he negotiates with the lender. Once you pay the fee, or a few mortgage payments, the scammer disappears with your money.

Fake "Government" Modification Programs
Some scammers may claim to be affiliated with, or approved by, the government, or they may ask you to pay high, up-front fees to "qualify" for government mortgage modification programs. The scammer's company name and Website may sound like a real government agency, but the Website may end with .com or .net instead of .gov. You may also see terms like "federal," "HAMP," "MHA," "HARP" or other words related to official U.S. government programs.

Contact your lender first. Your lender will be able to tell you if you qualify for any government programs to prevent foreclosure or modify your loans. And you do not have to pay to benefit from these programs.

Forensic Loan Audit
The scammer who may be called a forensic or mortgage loan “auditor” offers to review your mortgage loan documents to determine whether your lender complied with state and federal mortgage lending laws. The scammer will usually require that you pay a fee to start the process. The scammer may say you can use the audit report to avoid foreclosure, accelerate the loan modification process, reduce your loan principal, or even cancel your loan.

There is no proof that a forensic loan audit can save your home from foreclosure although it's conducted by a licensed, legitimate and trained auditor, mortgage professional or lawyer. Even if you sue your lender and win, your lender is not required to modify your loan to make it more affordable. If you cancel your loan, you will have to return the borrowed money, which may result in you losing your home.

Mass Joinder Lawsuit
The scam artist, usually a lawyer, law firm or a marketing partner, will promise that they can force your lender to modify your loan. They will tell you that by joining other homeowners in a mass joinder lawsuit against a particular lender, you will be able to stop a foreclosure, reduce your loan balance or interest rate, receive monetary damages, or even receive title to your house free and clear. Mass joinder lawsuits can be used legitimately; these lawyers are usually paid *after* the lawsuit is over, on a contingency basis. However, mass joinder lawsuit scammers will try to "sell" you participation in a lawsuit against your mortgage lender, claiming that you cannot participate in the lawsuit until you pay some type of fee.

The scam artist convinces you to sign documents for a "new loan modification" that will make your existing mortgage current. This is a trick. You actually just sign documents that surrender the title or deed of your house to the scam artist in exchange for a "rescue" loan. Thoroughly read any document before you sign it.

Rent-to-Own or Leaseback Scheme
A scammer urges you to surrender the title or deed of your home as part of a deal that will let you stay in your home as a renter and then buy it back in a few years. He may tell you that surrendering the title will permit a borrower with a better credit rating to get new financing—and keep you from losing your home. However, the scammer may have no intention of ever selling the home back to you.

But the terms of these deals usually make buying back your home impossible. Worse yet, when the new borrower defaults on the loan, you're evicted.


  1. The scammer raises your rent over time to the point that you can’t afford it. After missing several rent payments, you are evicted, leaving the "rescuer" free to sell your house.
  2. The scammer offers to find a buyer for your home, but only if you sign over the deed and move out. The scammer promises to pay you some of the profit when the home sells. But the scammer simply rents out your home and keeps the profits while your lender proceeds with the foreclosure. You lose your home and are still responsible for the unpaid mortgage, because transferring the deed does not affect your mortgage obligation.

Short Sale Scam
Scammers, sometimes called "short sale negotiators" or "short sale processors," may promise to expedite a short sale and usually require you to pay a fee, which is illegal in many states. Some scammers may even include surcharges or hidden fees before the transaction closes, which are also illegal in many states. The scammer may also misrepresent the value of the home to the lender.

A short sale may be a legitimate option for a homeowner in default or homeowner who is current yet the value of the home has fallen -- if the lender agrees to the short sale. But homeowners should only work with a licensed real estate professional or licensed real estate attorney since the law requires that the person be properly licensed to negotiate the short sale with your lender. Homeowners should verify licenses with their state licensing agencies.

Bankruptcy to Avoid Foreclosure
The scammer may promise to negotiate with your lender or get refinancing on your behalf if you pay a fee up front. Instead of contacting your lender or refinancing your loan, he pockets the fee and files a bankruptcy case in your name—sometimes without your knowledge.

A bankruptcy filing often stops a home foreclosure, but only temporarily. Filing bankruptcy stops any collection and foreclosure while the bankruptcy court administers the case. But, eventually you must start paying your mortgage, or the lender will be able to foreclose.

You could lose the money you paid to the scammer and your home. Worse yet, a bankruptcy stays on your credit report for 10 years, which makes it difficult to obtain credit, buy a home, get life insurance or even get a job.

Six Things You Should Know About Scams

Scammers prey on those who are looking for help or are in a tough situation. Find out how to spot them.

Scams aren’t always easy to spot – but it helps if you know the warning signs to look for. Here are six red flags to indicate that you may be dealing with a loan modification scammer:

  1. A company/person asks for a fee in advance to work with your lender to modify, refinance or reinstate your mortgage.
    They may pocket your money and do little or nothing to help you save your home from foreclosure.
  2. A company/person guarantees they can stop a foreclosure or get your loan modified.
    Nobody can make this guarantee to stop foreclosure or modify your loan. Legitimate, trustworthy HUD-approved counseling agencies will only promise they will try their very best to help you.
  3. A company/person advises you to stop paying your mortgage company and pay them instead.
    Despite what a scammer will tell you, you should never send a mortgage payment to anyone other than your mortgage lender. The minute you have trouble making your monthly payment, contact your mortgage lender.
  4. A company pressures you to sign over the deed to your home or sign any paperwork that you haven’t had a chance to read, and you don’t fully understand.
    A legitimate housing counselor would never pressure you to sign a document before you had a chance to read and understand it.
  5. A company claims to offer “government-approved” or “official government” loan modifications.
    They may be scam artists posing as legitimate organizations approved by, or affiliated with, the government. Contact your mortgage lender first. Your lender can tell you whether you qualify for any government programs to prevent foreclosure. And, remember, you do not have to pay to benefit from government-backed loan modification programs.
  6. A company/person you don’t know asks you to release personal financial information online or over the phone.
    You should only give this type of information to companies that you know and trust, like your mortgage lender or a HUD-approved counseling agency.

Printable Information (PDF)

If you have a question or experience a problem related to a mortgage or foreclosure, or have been targeted by a mortgage or foreclosure-related scam, we want to hear from you. Complaints from members of the public help us to identify potential violations of Hawaii law and new problems occurring in the marketplace. In addition, we can sometimes help people solve problems they are having with their mortgage or lender. If you have been scammed, please File a Consumer Complaint.