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Bogus mortgage brokers targeting US property owners who risk default

The brokers are contacting them with offers to save them from foreclosure only to make off with thousands of dollars in fees.

One particularly popular scam is to offer the distressed property owner a rent to buy scheme. The fraudster convinces the owner to sign over the title of the property and buy equity as a renter.

So the owner avoids foreclosure but then risks being evicted by the firm that has rescued them when they can't meet the new repayments.

The situation is so bad in Florida, one of the worst hit states in the US, that State Attorney General Bill McCollum has filed suit against National Foreclosure Management, a mediation company, for allegedly defrauding troubled homeowners.

Fraudulent rescue companies in Illinois are being increasingly penalized, while in Massachusetts the for-profit practice of foreclosure rescue transactions has been banned.

'A lot of people did not have the necessary reserves or backup plans. No one anticipated that the market would change overnight,' said Marki Lemons, who specializes in foreclosure properties for Rubloff, a Chicago real estate firm.

It is not good news for legitimate firms. The bogus firms pose as mediation specialists or counselors promising to rescue homes from foreclosure. Naturally, they work for a fee. While they might not charge an excessive amount of money, between $300 and $6,670, once homeowners pay the first installment the so-called specialists disappear.

If they are lucky they only lose the fee but if they have surrendered their title the face losing the whole property under a more sophisticated version of the scam.

Once the title is surrendered, the fraudster makes off with what equity the homeowner has built. Even worse, if the title has been surrendered and the new owner falls into foreclosure, the original homeowner will be evicted because they no longer possess a legal claim on the property.