Foreclosure can be a scary prospect, especially if you’ve recently lost your job or have other bills that are piling up.  Foreclosure is a process through which a bank or other lender takes possession of a property. Foreclosure occurs after a borrower has defaulted (failed to make payments) on a loan that the property secures.

Foreclosure has a very negative effect on a borrower’s credit rating. For awhile, foreclosure has nearly the same effect on personal credit that a bankruptcy does, but foreclosed borrowers may be eligible for a new mortgage within a few years of the foreclosure, compared to seven or ten years in bankruptcy proceedings. To avoid losing a home or ruining their credit, borrowers facing foreclosure may look for alternatives that may help them stay in their homes.

Enter the foreclosure prevention scams that on vulnerable homeowners with promises of foreclosure avoidance, lowered mortgage payments, forgiven mortgage debt and even credit repair. These scams often cost desperate homeowners thousands of dollars and eventually produce the exact situation the homeowner was trying to avoid: the loss of the home.

1. Understand who you’re dealing with.  If the “foreclosure expert” you’re dealing with doesn’t work with a non-profit organization, or isn’t approved by the Department of Housing and Urban Development (HUD), walk away.

2. Understand how much the service will cost and what you’re getting for your money.  Most non-profit, HUD-approved counselors charge nothing to the borrower facing foreclosure. Others charge a nominal fee.  Your costs shouldn’t reach into the hundreds or thousands of dollars. If a proposed foreclosure prevention plan requires payment, or worse, payment up front, you’re likely dealing with a disreputable firm.

3. Don’t re-route mortgage and/or tax payments on your property through a third party. Make mortgage and tax payments directly to the lender if you have an escrow account. If your taxes aren’t paid in escrow, pay your taxes through the municipal authority where your home is located.

4. Don’t sign anything without reading it.  Many “foreclosure prevention” schemes operate by convincing the owner to sign over the title to the home, most often to the foreclosure prevention company.  Your home’s mortgage and its title are two different things. Transferring title to the home doesn’t change your mortgage obligations in any way. Consult with an attorney before signing any documents related to the deed for the property.

5. Avoid foreclosure counselors who “guarantee” that they can stop the foreclosure process. The bank or mortgage lender has the ultimate power to initiate and stop foreclosure. No one else can make guarantees about the foreclosure process.