New app targets foreclosure rescue scams

In an attempt to disrupt scams that target homeowners trying to fend off foreclosure, one state has launched a new tool to help consumers separate legitimate attempts at help from those that come from crooks.

New York Attorney General Eric T. Schneiderman on Tuesday released a web-based app called AGScamHelp to give homeowners a way to see if an outfit offering help to those who are struggling has been checked out by a government agency.

While the information includes housing counselors and others who have been checked out by the U.S. Department of Housing and Urban Development, the app has a decided New York tilt. Most of the groups that have been vetted by the attorney general, for obvious reasons, are New York-based and part of the state's Homeowner Protection Program. That includes 85 counseling and legal service providers that homeowners can turn to for help at no charge.

"While my office is committed to cracking down on scam operations that target struggling New Yorkers, the most powerful tool against these frauds is to ensure that consumers are informed and aware of the free services that are available to them through our Homeowner Protection Program," Schneiderman said in a statement. "Through our new education initiative, we're putting facts in the hands of those who are at immediate risk of foreclosure - and at immediate risk of getting scammed."

Many government agencies have tried to promote educational programs intended to help those most vulnerable to these scams -- typically lower-income families unaware they are being targeted. Most states have some sort of foreclosure relief education program to help point homeowners in the right direction.

The scams typically involve making promises to homeowners that they can avoid foreclosure by negotiating reductions to mortgage payments or getting forgiveness on part of the principal. The homeowner then is asked to pay fees upfront, and doesn't end up receiving any of the promised services. The scam is particularly troubling because it helps drive people who are on the precipice over the edge under the guise of being helpful.

Here is a list of warning signs of a foreclosure scam from the Federal Trade Commission:

  • You receive a guarantee to get you a loan modification or stop the foreclosure process -- no matter what your circumstances.
  • You are told not to contact your lender, lawyer, or housing counselor.
  • The business claims that all or most of its customers get loan modifications or mortgage relief.
  • You are asked for an upfront fee before providing you with any services (unless it's a lawyer you've checked out thoroughly).
  • The business will accept payment only by cashier's check or wire transfer.
  • You are encouraged to lease your home so you can buy it back over time.
  • The business tells you to make your mortgage payments directly to it, rather than your lender or tells you to transfer your property deed or title to it.
  • You are pressured to sign papers you haven't had a chance to read thoroughly or that you don't understand.
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    Mitch Lipka is an award-winning consumer columnist. He was in charge of consumer news for AOL's personal finance site and was a senior editor at Consumer Reports. He was also a reporter for The Philadelphia Inquirer and the South Florida Sun-Sentinel, among other publications.