Three realty fraud suspects in Modesto, CA, were sent to trial this month, accused of lying to steal the trust of seven families facing foreclosure and then tricking them into signing over property deeds for a fraction of their value.

In Denver, CO, a home owner facing foreclosure responded to a brochure from a Clearwater, FL-based company, paid the company $1,000, but lost her home anyway. She still gets offers from Florida to save a home she no longer owns.

The U.S. District Court in Cincinnati recently put the kibosh on a faith-based come-on that made victims of 25 homeowners trying to save their homes from foreclosure.

Like carrion crows circling carcasses, frauds faking foreclosure fixes can smell the red ink and are moving in for a feeding frenzy in markets where more and more home owners are defaulting on their mortgages.

Irvine, CA-based RealtyTrac.com says foreclosure rates nationwide in October were up 42 percent from a year ago and the foreclosure rate, 1 for every 1,001 households, was the second-highest this year.

So far this year, more than 1 million properties have entered some stage of foreclosure, and that number is up 27 percent from the same period last year.

Where is the most concern? Hardest hit were Colorado, Nevada, Georgia, Michigan, Illinois, Florida, Ohio, Tennessee, New Jersey and Utah, which posted the highest foreclosure rates by state.

In raw numbers of new foreclosures filed in October, California, Florida, Texas, Michigan, Illinois, Ohio, Georgia, Colorado, New Jersey and New York topped the list.

For metro areas, Greeley, CO; Detroit, MI, and Modesto, CA, posted the highest foreclosure rates in October, RealtyTrac reported.

The National Consumer Law Center, in "Dreams Foreclosed: Equity-Stripping Foreclosure 'Rescue' Scams", has identified three common foreclosure-fixing frauds and offers advice to help you avoid them.

  • The Phantom. The "rescuer" charges a home owner facing foreclosure exorbitant fees for light-duty phone calls and paperwork the home owner could have performed. The home owner loses valuable time to prevent foreclosure, gains nothing and the "rescuer" vanishes with the home owner's cash.
  • The Bailout. The "rescuer" gets the home owner to surrender title to the house believing he or she is making a deal to become a renter and buy back the home over the next few years. Later, buy back becomes impossible, the home owner permanently loses possession, and the "rescuers" disappear.
  • Bait and Switch. Home owners believe they are signing documents for a new loan to make the mortgage current, but actually surrender the title of the home for a fraction of its value and immediately lose ownership.

To avoid being taken, experts advise:

  • Avoid doing business with individuals or companies that call themselves a "foreclosure service," "foreclosure consultant" or other similar names. Instead of being drawn in by telephone, postal mail and emailed come-ons, quickly take the initiative at the first signs of mortgage payment problems and contact your lender -- first. Later, if you choose to seek outside counseling or assistance, check with family, friends, co-workers and others you trust for referrals to help. Then, be sure to check out company backgrounds and references with licensing agencies, trade groups and other agencies that can help you make an informed decision.
  • Don't fall for fake promises like, "We'll save your credit," "We'll pay the closing costs," "We'll buy your house 'as-is'," and "If you sign the house over to us, the foreclosure will be recorded against us," among a host of other come-ons.
  • Stay away from those who contact or advertise to people whose homes are listed for foreclosure. Discard fliers and shut the door on door-to-door solicitors.
  • Steer clear of people who say they need to collect a fee before providing any services. Never make your mortgage payment to any one but your lender or mortgage servicer.
  • Ignore anyone who tells you to transfer your property deed or title to them or their company, no matter how compelling their offer. Be especially wary of offers to take over ownership of your home as part of a deal that allows you to rent your home and then buy it back after a few years.
  • Get full information on the foreclosure process in your state and especially how much time you have to resolve your problems short of losing your home. Make sure you understand all deadlines for responding to court documents, documents from lenders and other important papers. Be especially sure that you know the point at which you can lose the legal right to own your home.
  • Never sign a contract or other documents under pressure. Seek help, from an attorney, social services agency, legal aid or someone you trust to review any foreclosure-related paper work.
  • Never make verbal agreements. Never sign blank pages where information can be added later. Never sign anything you don't understand.
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