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Watch out for these Foreclosure Scams

The problem is so bad that in Portland, Ore., local police now automatically send a letter to homeowners who enter foreclosure warning them that they will be inundated with shady offers of help. In one case in Maryland, a single firm is accused of bilking hundreds of residents out of their homes and stealing $60 million in equity. Similar large-scale scams are happening elsewhere; in fact, foreclosure fraud is so common that it's exacerbating the nationwide housing slump, adding to the ranks of distressed homes that pull down the housing market in general, according to some experts.

There are many variations on the scams, but they all boil down to two types. There’s a simple fee-based racket, in which the criminal offers to help the homeowner stave off foreclosure, collects an up-front fee and then disappears. But the more lucrative scheme involves seducing homeowners into complicated transactions that allow the middlemen to steal equity in the house or walk away from the closing table after netting thousands in phony payouts.

How serious is the problem? The proliferation of roadside signs with entreaties like “We buy houses and late night infomercials promising easy real estate riches offers a clue.

"There is a booming business in selling information on foreclosures, said Melissa Huelsman, a Seattle-based lawyer who represents victims in predatory lending cases. “There are whole companies that do that and little else. That gives you an idea how big this is.

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