What is a Mortgage Scam?

There are various types of mortgage scams. They are complex type and most involve an up-front fee. In February 2011, the Federal Trade Commission (FTC) issued a rule prohibiting the payment of any up-front fees to negotiate mortgage-reduction payments on behalf of a homeowner. Nevertheless, an untold number of companies and individuals continue to openly violate the rule, asking for an average up-front fee of $2,500 to modify a mortgage. The homeowner pays the fee and sees no results. At HPF we have seen an alarming uptick in the number of callers who, in addition to dealing with the stress of possible foreclosure, have been victimized by some type of fraudulent activity.

Mortgage scam artists seem to prey on minorities in particular. Virtually half of the potential scam calls fielded since our hotline was launched have been from homeowners who voluntarily identified themselves as African-American, Hispanic or Asian. The same population groups that were disproportionately targeted for predatory lending during the housing boom are now bearing the brunt of an unusually high percentage of mortgage scams. Senior citizens across all demographics are also particularly vulnerable.

Six Warning Signs You’ve Been Scammed

According to the U.S. Government Accountability Office, there are two primary types of foreclosure rescue and loan modification scams: Advance-fee loan modification scheme: This occurs when you are asked to pay a fee ahead of time for the promise of a guaranteed loan modification. Sales-leaseback scheme: While there are several versions of this scam, at its core it involves the homeowner surrendering the title to his/her home in exchange for being allowed to continue occupying it as a renter, buying the home back over the next few years. Once the title is turned over, however, the scam artist forces the homeowner out of the home.


  1. A company/person asks for a fee in advance to work with your lender to modify, refinance, or reinstate your mortgage. In addition to such fees being prohibited by the FTC, the company/person demanding one will likely take your money without performing any of the services.
  2. A company/person guarantees they can stop a foreclosure or get your loan modified. No one other than your lender can guarantee they can stop foreclosure or modify your loan.
  3. A company/person advises you to stop paying your mortgage company and pay them instead. Under no circumstance should you ever send a mortgage payment to anyone other than your mortgage lender.
  4. A company/person pressures you to sign over the title to your home or sign any paperwork that you haven’t read or don’t fully understand. A legitimate housing advisor should not and will not pressure you to sign a document of any kind. Remember, surrendering the title to your home is one of the two primary ways people get scammed every day!
  5. A company/person claims to offer “government-approved” or “official government” loan modifications. Scam artists often pretend to be affiliated with the federal government. Be sure to check any third-party’s credentials by contacting your mortgage lender or by calling the HPF Homeowner’s HOPE Hotline at Call 888-995-HOPE™ (4673) to learn more about government programs for which you may qualify.
  6. A company/person you don’t know asks you to release personal financial information. Always confirm that you are speaking with a legitimate company/person by contacting your mortgage lender directly or by calling the HPF  Homeowner’s HOPE™ Hotline at 888-995-HOPE™ (4673).

We at the Advocacy Network are also available to help you identify and potential exposure to any form of financial victimization. Check out our content and info here on the blog as well the website. We provide help in all financial services industries for all your personal, business or organizational needs.

Karl Schilling 321-947-3220