The Common Law

Beware of this company. The increase in the number of foreclosures nationwide has allowed "foreclosure rescue" or "foreclosure prevention specialist" companies to spring up around the country. In many cases, the companies offer nothing more than a cement life jacket.

These companies often promise to negotiate with your lender to prevent foreclosure or offer complex financial arrangements with no benefit to the homeowner. For example, many foreclosure-prevention companies charge high fees (often equivalent to several months' worth of mortgage payments) to fill out basic paperwork and have discussions with the lender that the homeowner can easily accomplish. Rather than pay hefty fees for foreclosure-prevention advice, a homeowner can obtain free counseling from a U.S. Department of Housing and Urban Development-approved housing counselor (call 800/569-4287) and use the money to pay down the mortgage.

Other foreclosure-prevention companies claim to be able to stop foreclosure immediately. Despite the obvious "too good to be true" nature of the offer, the looming risk of foreclosure creates a desperation that makes some homeowners susceptible to this scam, which often involves the homeowner signing a document to appoint the company to act on their behalf. Later in the process the homeowner learns that foreclosure is still proceeding, and the company now claims a legal interest in the property based on the signed documents.

Homeowners who insist on working with a foreclosure-rescue company should be sure to take a long, hard look at the company's credentials and business reputation by checking it out with the Central Texas Better Business Bureau, Texas attorney general's office, or HUD. Read next week's "Common Law" column to learn more about specific scams and fraudulent methods used by many foreclosure-rescue companies to take advantage of homeowners.