Special section - Fighting foreclosure
mortgage
Foreclosure scams

Shelter from the storm

States are stepping in, however, on behalf on homeowners. "There is certainly attention being paid to these scams," says Lauren Saunders, managing attorney of National Consumer Law Center Washington office. "Several states have passed statutes specifically against foreclosure scams."

The best such law is in Massachusetts, says Saunders. "The attorney general issued an emergency regulation to ban foreclosure rescue scams, prohibiting title transfers that are done for profit." The regulation does not prohibit title transfers to avoid foreclosure if they are not done for profit, for instance between family members or a nonprofit organization.

With credit tightening up, what should you do if foreclosure seems imminent?

Harvard Law School professor and bankruptcy expert Elizabeth Warren says if there is time, by all means refinance out of your zero-interest or adjustable-rate mortgage into a fixed-rate mortgage. "Even if it costs a little more, there will be a point in the future when you will thank every lucky star you have that you did it," she says.

If you've received a foreclosure notice, contact your mortgage servicer directly or seek help a mortgage counseling agency.

How can you be sure you're getting help from a legitimate counselor and not a fraudster?

"There's a couple of warning signs or ways to identify these unfortunate scam operations," says Josh Fuhrman, director of counseling for the Homeownership Preservation Foundation, the agency that runs the Homeowners Hope Hotline, (888) 995-HOPE. "The first and easiest way , of course, is that any type of foreclosure advice really should be free. If you're paying anybody for any advice, you're likely not dealing with a reputable organization."

Another sign of a potentially fraudulent "counselor": high-pressure tactics.

"They have a tendency to push you to act quickly and get them payment in their hand right away," Fuhrman says. "Foreclosure intervention is a process and it usually takes some time . So, if people are forcing you into action quickly, you may want to make sure you're checking them out."

The best way to make sure you're dealing with an above-board homeowner aid organization, according to Fuhrman, is to "see if they are a HUD-certified organization."

If you can't refinance, renegotiate or sell quickly, it may make sense to look at filing for bankruptcy.

"You're looking at a population that fears or loathes bankruptcy, and understandably. But it may be a more reasonable option instead of carrying on and maintaining a debt that you may still be obligated to pay," says Ebihara.

Benjamin Diehl, deputy attorney general for the state of California, admits that even his state's anti-foreclosure scam statute, the toughest in the nation, struggles for want of enforcement.

"You could impose additional licensing fees, but if it's a crook, they're just going to operate without a license," he says. "What it's going to take is not necessarily extra regulatory hurdles or extra licensing requirements, but crackdowns."

Like Warren, Diehl is worried. He's seen foreclosure scams being taught in get-rich-quick seminars from coast to coast while credit slowly tightens, putting additional pressure on those in the squeeze.

"With the huge increase in foreclosures, we're also starting to see greater concern with foreclosure scams," says Diehl.

Warren is just as pessimistic: "It's like watching a train wreck in slow motion."

Claes Bell contributed to this report.

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