Watch Out for These Foreclosure Scams

"We believe that by joining these two segments of the community, each can have their needs met -- homeowners can prevent foreclosure and service providers can find a group of people hungry for their services," says HomeLeafs.com CEO Wesner Michel. "During this sensitive time, we want to make the process as convenient and comfortable as possible."

Freddie Mac (FRE), which has a foreclosure investigations unit, reports that one of its 2007-sponsored studies discovered that 25% of delinquent borrowers go to the Internet first for mortgage information -- that's only slightly less than those who first call their mortgage lender (28%) or bank (32%).

To reach homeowners who turn to the Internet for information, Freddie Mac posted a dramatization of a common foreclosure scam on YouTube. It also launched an "Avoid Fraud" page on its Web site and added two fraud investigators this year and are likely to add three more in 2008, says spokesperson Brad German. "We are trying to reach borrowers through a variety of channels," he says.

The NFCC also has a Web site to educate consumers about such scams and other housing-related issues. At the site is the homeowner self-diagnostic tool called Mortgage Reality CheckSM, which can help homeowners assess their risk of foreclosure.

Red Flags

The NFCC advises homeowners fearing foreclosure to proceed with extreme caution if an individual or company:

Calls itself a "mortgage consultant" or "foreclosure service."

Contacts people whose homes are listed for foreclosure, including anyone who uses flyers or solicits for business door-to-door, by phone or email.

Encourages you to lease your home so you can buy it back over time.

Collects a fee before providing any services to you.

Instructs you to cease all contact with your lender, credit or housing counselors, lawyer or other legitimate experts.

Tells you to make your mortgage payments directly to him or his company (not the lender).

Requires that you transfer your property deed or title to him or his company.

Makes a promise that seems too good to be true, for example, instant cash with "no strings attached."

Tells you that as part of the deal you will need to move out of your house for some period of time for remodeling or other reasons.

Offers to buy your house for cash at a fixed price that is not set by the housing market at the time of sale.

Source: The National Foundation for Credit Counseling