Foreclosure Rescue Scams and Home Equity Theft

If you have fallen behind on your mortgage payments and your home is in foreclosure or default, be aware that you and your home may become targets for home equity theft or foreclosure rescue fraud scams.

The perpetrators of these scams claim they can solve your debt problems and stop your foreclosure.  They then use deceptive tactics to obtain ownership of your home for a fraction of its market value, and leave you homeless yet still the holder of the mortgage that is still in foreclosure. 

If you are having problems making your mortgage payments or are in default or foreclosure, contact your lender immediately.  Lenders generally prefer to work out a new payment plan, than actually go through the complex process of foreclosure. 

If you are facing foreclosure, you should know your rights under the law and be aware of the signs that someone is attempting to take advantage of you.

How the scammer finds you

When your home enters foreclosure, your lender files a record of foreclosure—called a “lis pendens”—with the local county clerk’s office. The county clerk’s office publishes a list of all recorded foreclosures in the county, including the address, on a weekly basis in local newspapers.  Scammers obtain these lists to find vulnerable homeowners. 

The scammer will contact you by mail, by telephone or even by knocking on your door, and offer you some sort of financial solution to your foreclosure or default.  Sometimes these scammers will target entire neighborhoods or cities by posting advertisements and fliers marketing their services.  In these offers, they claim to be able to “stop foreclosure,” “save your home” or get you “quick cash for your home.” 

How the scammer deceives you

These predators try to convince you that they want to “rescue” you from foreclosure and offer you one of any number of fraudulent “solutions”, including:

  • Buying your home so that you can pay off your mortgage and then live in the house as a renter, at a low rent, until you can afford to buy back the home;
  • Paying your mortgage in exchange for temporarily holding the deed to the home, allowing you to live in the home as a renter, at a low rent, until you can afford the mortgage payments again;
  • Asking you to put the deed to your house in another person’s name (who allegedly has better credit than you do) so that the scammer can find you new and more affordable financing;
  • Making a low-cost loan to you so that you can pay off some or all of your mortgage, and then pay back the scammer, who holds the deed to the house as collateral; and
  • Offering to negotiate on your behalf with your lenders for reduced interest rates and debt forgiveness.

Once you agree to one of these “solutions”, the scammer then steals your home or your equity by using deceiving practices such as:

  • Convincing you to sign a contract that seems to be for the legitimate sale of your home to the scammer, but actually just gives over your home’s deed to the scammer with no requirement for any payment to you;
  • Convincing you to sign a contract with a buyback agreement that states you must pay an enormous fee when you buy your home from the scammer, or states you must buy back the home within an extremely short period of time, making it impossible for you to ever save enough money to do so;
  • Charging you extremely high interest rates and fees on what was promised to be a “low-cost” loan with which you could pay off your mortgage, and then taking the deed to your home when you default on that loan;
  • Actually buying your home from you, but then charging you huge hidden fees that suck up much or all of the proceeds of the sale;
  • Charging you huge fees for “negotiating work” with the lender that is either never done, or that you could have done;
  • Lying to you about the length of time you have before your house is put up for foreclosure auction, pressuring you to sign documents quickly and without reading them; and refusing to allow you to speak to your lender or lawyer.

Ultimately, the scammer has either bought your home for a fraction of its legitimate price or has actually stolen the deed to your home without a penny of payment, leaving you homeless but still responsible for the mortgage, which is still in foreclosure!   In some cases you might keep ownership of your home, but pay so many fees or so much interest that you are broke and have no money for future payments.

How to avoid being scammed

Never do business with anyone who calls you, mails you, or knocks on your door with offers to help fix your foreclosure or default. Do not respond to advertisements and fliers making similar offers.

If you are having problems making your mortgage payments or are in default or foreclosure, contact your lender immediately. Lenders often prefer to work out a new payment plan, rather than go through the foreclosure process.

If you are facing foreclosure, contact a certified housing counselor. Housing counselors can help you and, unlike scammers, they can give you advice on your options and resources, help you find free legal services, and help you negotiate better financing for your loan.

Never sign any papers or contracts and never enter into any agreement without first consulting your own lawyer—not a lawyer provided by the individual offering to “help.” 

Get Help! Contact a Not-for-Profit Housing Counselor

Housing counselors that handle foreclosure-related issues can give you advice on your options and resources at little or no cost. They may also be able to negotiate with your lender for free and help you find free legal services in your area.

Housing counseling resources for New Yorkers include:

  • New York’s Homeowner Protection Program (HOPP), which connects with housing counselors and legal services at no cost. Call the HOPP hotline at (855) 466-3456 or visit
  • You can find a list of approved non-profit housing counselors by county here, on the DFS website.
  • 24-Hour assistance is available toll-free on the HOPE NOW hotline at 888-995-HOPE (888-995-4673). HOPE NOW is an alliance of HUD approved counseling agents, servicers, and investors that provide free assistance.
  • If you live in New York City, you can also call 311.

If you are in a foreclosure court case, you should consult an attorney. 

Seek Legal Assistance

Contact a lawyer and review your mortgage documents. Make sure your loan is not in violation of any laws. If you do not have an attorney, the New York State Bar Association may be able to refer you to an appropriate attorney for your situation.

If you cannot afford a private attorney, resources for free or low-cost legal assistance include:

If you are in a foreclosure court case, you should consult an attorney.

File A Complaint

Learn how how to file a complaint with DFS.