Consumer Comeback Blog

Foreclosure: Just the Facts

Foreclosure: Just the Facts

Those who have low incomes or lose their jobs are not the only ones that may be facing foreclosure. There are various reasons people have difficulty making ends meet and eventually face foreclosure because they are unable to make their mortgage payments. Individuals from all walks of life deal with foreclosure, and it is more common than most people realize. If they miss even one payment on their mortgage, it is very difficult to catch up because they must make their current payment in addition to the missed payment.

Mortgage companies actually lose money when they foreclose on a house, so they do not benefit from the process. They profit more by receiving payments every month than by paying for the legal process of foreclosing and possibly selling the house for less than it’s value.

If you are having financial difficulties, begin by contacting your lender as soon as you know you will not be able to make all or part of a mortgage payment. The company may be willing to work out a payment plan that you can manage in order to keep you in your home and encourage you to continue making payments. However, do not believe everything your mortgage company tells you when they say they are trying to help because they are usually more interested in themselves and their profit than in helping you.

If you do not get satisfaction by discussing options with your lender, seek out a respectable consultant to get advice from a reputable third party who will give you valid information and help you make the best decision based on your particular situation.

Legitimate Counselors

According to information posted on the Federal Reserve Board, you should be certain any counseling agency you work with is on the Department of Housing and Urban Development (HUD) approved agency list. Many counselors approved by HUD offer counseling services free of charge, and many others provide services at a low cost.Another source of help is the Homeownership Preservation Foundation (HPF). It is a nonprofit organization operating a toll-free hotline (1-888-995-HOPE) to assist homeowners in avoiding foreclosure.

It is regrettable that some unprincipled companies are willing to use others’ misfortune for their own profit, but that happens all too often, and you should be aware of the danger.


Do not work with a counselor who asks for a fee before providing service or who asks for payment by only wire transfer or cashier’s check. Get every detail of your transaction in writing, and know exactly what you will receive for your money before paying anything or signing a contract.

Do not sign anything until you read and understand it. Do not let anyone pressure you to sign a blank form or allow anyone to fill out a form for you. Do not sign any form that may transfer the title of your home to someone else without first seeking the advice of an attorney.

Be skeptical of guarantees because they may be an indication that a counselor is disreputable. Legitimate counselors will not promise a sure thing, but your chances of avoiding foreclosure may be greater with their assistance.

Information on the Federal Trade Commission (FTC) site reveals that many companies claim they can change your mortgage to reduce your loan payment or save your home through some other steps. Some companies say that most of their clients get successful results from their services and guarantee your success as well. Others state that they are associated with your lender or the government, and some pledge the help of real estate specialists or attorneys. Many of their statements are either false or partial truths, and they do not fulfill their promises, so they leave many customers with worse financial woes than they had before.

One of the functions of the FTC is to protect consumers, and it has a rule called Mortgage Assistance Relief Services (MARS) to defend homeowners. The rule states that companies cannot collect a fee until homeowners have and accept a relief offer from their lenders. Therefore, you do not have to pay for the company’s service unless you get the relief you seek.

There are legitimate options available to avoid foreclosure, even if the process has already started, so do not let desperation deceive you into falling for a scam where you will only lose money.

Typical Scams

Mortgage scam companies search newspapers, the Internet or public files in local government offices for public foreclosure notices to find their victims. Then they send letters to the homeowners offering to help them. Others advertise their services through television, radio, the Internet, newspapers, posters or flyers using simple but deceptive messages.

Some scam artists say they can negotiate with your lender to lower your payment, and they may claim to represent a law firm. They may promise to manage all the details after you pay them and then tell you not to contact a credit counselor, attorney or your lender. They may tell you to make your mortgage payments to them as they negotiate with your lender and then disappear with your money after collecting a few months of payments.

Some companies offer to review your mortgage papers to determine if they comply with the law. They claim their report can help you reduce your debt, avoid foreclosure, speed a loan modification or even cancel the loan.

Other companies ask you to give them the title to your house and then rent it from them, so you can buy it back later. They claim they can get new financing and save your home, but the loans they get have such high payments that they eventually default, and you lose the money you paid them as well as your home.


Although the situation is not pleasant, there is hope for people facing foreclosure. Others have survived the ordeal, and it is possible to go through the process and learn valuable lessons that will be a benefit in the future. Resources are available to find legitimate information about avoiding foreclosure.