In September, foreclosure rates were up 46% in Washington over last year at this time. As more people are faced with this difficult situation, I guess it is inevitable that more and more con artists will emerge to try to take advantage of those in this vulnerable position.

This article will look at some of the most common scams encountered by homeowners who are faced with foreclosure, and will provide some simple rules to follow that will allow you to outwit the con artists, and save your home.

THREE COMMON FORECLOSURE SCAMS: (and Simple Rules to Defeat Them)

Scam #1. The Foreclosure “Consultant” Scam

In this scam, someone tells you that you should sign over your deed (commonly known as a “quit-claim” deed) to them, to be held in escrow. Then they will have you take out short term loans, and have the proceeds wired to their own accounts.

To make matters worse, the foreclosure “consultant” will promise to renegotiate the homeowners debt, and/or prevent the foreclosure. These “consultants” have the homeowner pay them some combination of an up-front fee, a monthly fee, and/or “rent.” The promised foreclosure relief and debt renegotiation never takes place.

Rule #1: Do Not Sign Over The Deed To Your Home: All the variations of this scam begin with asking the homeowner to sign over their deed. If you do this, you haven’t just lost your house, you’ve given it away. Or even worse, paid someone to take it from you!

Scam #2. The “Bankruptcy/Foreclosure” Scam According to the U.S. Department of Justice, this is the most common foreclosure scam on the West Coast. The con artist says they can save the homeowners house for a fee of several hundred to a few thousand dollars a month. They have their “clients” sign the bankruptcy forms and tell them they will be working on their behalf, often stating that they will pay the mortgage payments out of their fee. The “client” doesn’t question the actions of the consultant, because, for a time, the foreclosure is automatically postponed by the initiation of bankruptcy proceedings, and the homeowners stop receiving collection calls and letters.

There are two variations on this scam. In the first, a new bankruptcy is partially filed for the homeowners. This automatically stops the foreclosure action. Unfortunately, the bankruptcy process falls through, as no one actually appears in court, and the house is foreclosed on. The second variation simply takes a partial interest in the home (remember: Don’t sign over your deed), and transfers that interest to an individual or business already involved in a bankruptcy. The partial interest may be transferred several times, up to a record 24 times in one case!

Rule #2: When Filing Bankruptcy, Work With a Reputable Attorney: Don’t try to save a few dollars by avoiding attorney’s fees. If you are going to file bankruptcy, it’s because you have something you don’t want to lose. It’s definitely worthwhile to pay a bankruptcy attorney to represent you.

Scam #3. The “Remodel” Scam This scam works by having a “contractor” contact the homeowners, offering to remodel their home. After the remodel, so the story goes, the home will be able to sell for more money, which will be split between the “contractor” and the homeowner. The trap is set when the homeowner is required to sign over the house. Alternatively, the homeowner may be told that they need to immediately move their belongings out of the house so they can start construction.

Instead, the home is immediately rented out for cash, the mortgage payments remain unpaid, and the “contractor” often files bankruptcy so that he, not you, can hold onto the property a little longer.

Rule #3: Don’t Move Out: When you move out of your home, you lose a lot of your options, as well as incurring rental expenses for your temporary residence.

Facing foreclosure can be a very difficult time for all homeowners. Falling behind on mortgage payments can occur for a number of unfortunate but legitimate reasons. It may seem like the entire world is out to get you.

But there is good news, if you are a few months behind on your mortgage payments. There are mortgage experts who can help you, and there are loan products designed specifically to keep you from losing your house. Most lenders can get you a temporary or “quick-fix” loan, but you need to make sure that you have a sound exit strategy in place or you may find yourself in worse shape than you are right now.