Financial Update (First Quarter 2009)

Fed Provides Tips on Avoiding Mortgage Scams

Avoid Fraud

Reports of mortgage foreclosure scams are on the rise, and the Federal Reserve Board has compiled some tips to help protect consumers from becoming victims of foreclosure avoidance scams. It's important for consumers to know that housing counselors and other resources are available at no or low cost to assist homeowners who have fallen behind on their mortgage payments.

"Saving a home from foreclosure requires fast and informed action but the solution doesn’t have to be costly," said Federal Reserve Governor Elizabeth A Duke. "It shouldn’t hurt to get help."

Fraudulent approaches come in several forms
Solicitors of foreclosure schemes reach out to potential victims by a variety of means using the Internet, telephone, and direct mailings. Some solicitors go door-to-door or approach homeowners at events related to home preservation. The information the Federal Reserve is providing is intended to give consumers the basic information they need to recognize and avoid foreclosure avoidance scams.

Press release off-site image

Tips for avoiding foreclosure scams off-site image

HUD-approved housing counseling agencies off-site image

FTC information on foreclosure rescue scams off-site image

The Fed is also urging consumers to check the credentials of counselors and avoid working with someone who collects a fee before providing any services or accepts payment only by cashier’s check or wire transfer. Consumers should not pay for a service without knowing exactly what they are buying.

Working with a legitimate counselor can increase the chances of keeping a home, but consumers should be wary of people who tell them that saving their home is a sure thing. Details of the transaction, along with any promises, should be provided up front and in writing.

Advice for protecting consumers given
The Fed’s tips to help consumers select a reputable counselor and avoid fraudulent foreclosure scams include

  • not paying a great deal for counseling. Most housing counselors provide no- or low-cost counseling services;
  • being wary of guarantees since results cannot be ensured;
  • not being pressured into signing paperwork you haven't had a chance to read thoroughly or you don’t understand; and
  • trusting your instincts and asking for help if you feel you are a fraud victim.

March 31, 2009