Foreclosure scams find loophole in federal ban

PHOENIX - Neighborhood Housing Services of Phoenix is seeing a large number of foreclosure scam victims, even though a federal trade commission ban was created to protect them against such scams.

The Federal Trade Commission state lawmakers created a new ban last year to stop phony counseling or foreclosure agencies from collecting up front fees. The only exception in the ban are attorney's offices. Attorneys can still collect a retainer upfront.

But scam companies are now finding their way through the exemption loophole by aligning themselves with attorney offices or hiring an attorney on staff so they can once again collect upfront fees.

"I can't imagine looking someone in the eye and saying I'm taking your money, so you're going to have zero money and maybe not a home to live in, in the end." said Liza Vasquez, a counselor with Neighborhood Housing Services of Phoenix.

Vasquez said the market is flooded with so much insincere help, homeowners are at a loss for who to turn to, "When these companies approach them, sounding sincere over the phone, they're gullible to that."

Another scam is being dubbed the "lease buy back."

"A company might say they have a deal for you,” said Vasquez. “They will buy your home and then say you can rent it back with an option to buy in a year or two."

The only problem is, if you make a late or fall behind on a payment, don't expect any leniency.

"If you're late even one day on any one payment that's considered a default and they'll retract the property from you," warns Vasquez.

The agency is warning homeowners about "counseling agencies" that may approach them and offer to perform certain services for a fee.

NHS officials said you could do most of the services for free, such as negotiating a new payment plan with your lender, or pursuing a pre-foreclosure sale.

They warn homeowners to not sign anything you don't understand or anything that is blank.

They also suggest going through a reputable escrow company to make sure your mortgage is paid off.

If you think you’ve been a victim of this fraud, contact 602-258-1659 for information.

You can also report a foreclosure scam to the Arizona Attorney General's Office by calling 602-542-5763 or visiting their website's Foreclosure Resource Center .