Examples of Mortgage/Foreclosure Fraud and Loan Modification Scams


Common loan modification scam themes fall into several categories, including phantom foreclosure counseling, sale/lease-back or repurchase, bait and switch, and fraudulent modification.

    Variations of the foreclosure rescue scams:

    • Phantom Help:  The “rescuer” charges outrageous fees for light-duty phone calls or paperwork that the homeowner could easily do, none of which results in saving the home. This predatory scam gives homeowners a false sense of hope and prevents them from seeking qualified help. 
    • The Bailout:  In this scam, the homeowner is deceived into signing over the title with the belief that he/she will be able to remain in the house as a renter and eventually buy it back over time. The terms of these scams are so onerous that the buy-back may be impossible, the homeowner loses possession and the “rescuer” walks off with most or all of the equity.
    • The Bait and Switch:  In this scam, the homeowners think they are signing documents to bring the mortgage current, but instead are actually surrendering their ownership. They usually do not know they have been scammed until they are evicted.

      Often loan modifications scammers try to circumvent recent federal and state law changes intended to protect consumers by prohibiting the charging of upfront fees. These laws have carved out an exception that allows attorneys to charge upfront fees for their work in helping homeowners obtain loan modifications within strict guidelines, so many scammers use attorneys as the face of their operations to collect an upfront fee and then never perform the promised services.

        Consumer mortgage fraud, sometimes called predatory mortgage lending, occurs when an individual, company or service provider materially misrepresents to or misleads a consumer with false promises or hopes that their mortgage can be saved or modified. 

        Mortgage fraud comes in many varieties, but here a few of the most common types and several ways to detect whether you are being scammed:

          • A loan modification is a negotiated change in a borrower’s loan allowing the loan to be reinstated with a payment the borrower can afford.  This scam occurs when an individual or company offers to help you renegotiate your mortgage, sometimes even promising that they can prevent a foreclosure on your home. They offer loans in the form of a principal reduction, debt forgiveness, and make guarantees that you are a qualified candidate when in fact only a lender can modify your loan, which typically occurs after you have submitted the required paperwork and they have approved the modification.

            • Predators sometimes claim to have a staff of attorneys working for them, when in reality they do not.

              • They will ask you to pay for services in advance in the form of cash, check or credit card. In Nevada, a service provider cannot legally collect upfront fees. Service providers are only paid when a successful loan modification is negotiated between the borrower and lender and loan modification documents are processed to the borrower’s satisfaction. In most cases, only a licensed attorney can collect an advanced or upfront fee.

                • A scam might include service providers claiming that they are affiliated with approved government agencies such as Home Affordable Modification Program (HAMP), Making Home Affordable Program (MHA), or Home Affordable Refinance Program (HARP), when in fact they are not. They ask you to pay high upfront fees in order to qualify for these loans. A borrower does not have to pay to receive benefits from governmental services. Contact the Home Again: Nevada Homeowner Relief Program; the program’s United States Department of Housing and Urban Development certified counselors can assist you at no cost.

                  • A lease back scheme occurs when a service provider requires a borrower to surrender the title or deed to their home as part of the negotiation process to purchase the home. As part of the deal, they tell the homeowner they can lease back the home from them until they are able to purchase it back after a few years. The allotted time will purportedly allow for credit repair from the harm done by losing the home. In most cases, the home is falsely purchased with no intention that the homeowner ever be able to purchase the home back. The home is often foreclosed upon several months later