How to Avoid Foreclosure Scams: 5 Red Flags and Protective Steps

Facing foreclosure is a highly stressful situation, and scammers often exploit this vulnerability. The most critical step to protect yourself is understanding that legitimate help is available for free and that any request for an upfront fee is a major red flag. This guide outlines the warning signs of foreclosure rescue scams and the official rules, like the Mortgage Assistance Relief Services (MARS) Rule, designed to protect homeowners.

What Are Common Foreclosure Scam Tactics?

Scammers use high-pressure tactics and false promises to trick homeowners. Be extremely cautious of anyone who:

• Guarantees they can "save" your home or significantly lower your mortgage payment.
• Claims false affiliations with government agencies, such as the U.S. Department of Housing and Urban Development (HUD), or your mortgage servicer.
• Instructs you to stop making mortgage payments and to pay them instead.
• Pressures you to sign documents immediately, especially those involving the transfer of your property's deed.

These are designed to create a false sense of urgency or hope, leading you to make rushed decisions against your best interest.

What is the MARS Rule and How Does It Protect Homeowners?

The Mortgage Assistance Relief Services (MARS) Rule is a federal regulation enforced by the Federal Trade Commission (FTC). Its primary purpose is to shield consumers from deceptive practices. Under this rule, it is illegal for a company to collect any fees from you until they have secured a written offer of mortgage relief from your lender and you have accepted that offer. This "no upfront fees" provision is your strongest defense. Furthermore, these companies must provide clear disclosures in their marketing, warning you of the risks of stopping mortgage payments, such as further damaging your credit and increasing the risk of losing your home.

What Are 5 Essential Tips to Avoid Being Scammed?

Based on guidelines from the U.S. Department of the Treasury, here are five actionable steps to avoid foreclosure fraud:

1. Never Pay Upfront Fees for Counseling or Loan Modification. Reputable HUD-approved housing counselors provide their services at no cost to you.
2. Do Not Sign Over Your Property Deed. Never transfer the deed to your home to any individual or organization unless you are formally working with your mortgage company on a specific debt-forgiveness program.
3. Always Verify Payment Recipients. Never make a mortgage payment to anyone other than your mortgage company without their direct, verified approval.
4. Ignore High-Pressure Sales Tactics. Legitimate assistance programs do not require you to sign documents on the spot. Take your time to review everything.
5. Read and Understand the MARS Rule. Familiarizing yourself with these federal protections makes you a less likely target for scammers.

Where Can You Find Legitimate Help?

If you are struggling with your mortgage payments, act quickly but cautiously. Your first point of contact should always be your mortgage servicer directly. You can also seek free, confidential advice from a HUD-approved housing counseling agency. These counselors can help you understand your options, which may include loan modification, repayment plans, or other alternatives to foreclosure.

If you believe you have been targeted by a scam, file a complaint immediately with the FTC online through its Complaint Assistant or by calling 1-877-FTC-HELP (1-877-382-4357).