Foreclosure Scams

Authored By: Colorado Legal Services

How You Can Avoid Foreclosure Scams

What is foreclosure? +

Foreclosure is the process where the holder of a mortgage or other secured instrument seeks to recover the property covered by the mortgage to satisfy an unpaid debt. The end result of a foreclosure is that the property is sold and y ou lose that property.

What can I expect to happen if my house is in foreclosure? +

If your house is in foreclosure, you will be contacted by several individuals and companies, organizations and lending institutions, and real estate brokers and investors.


You will receive many letters, fliers, brochures, business cards, pamphlets and even personal visits to your home. Since foreclosures are public record, anyone can obtain access to information about your foreclosure either by contacting the Public Trustee's office of your county or from the newspaper.


It's possible that the person contacting you may know that the house is in foreclosure before you do!

Could I have equity in my home even if it is in foreclosure? +

"Equity" is the money that you would get if you were to sell your house and pay off the mortgages or liens that may be recorded against it. It is possible that you may have equity in your home despite being in foreclosure.

Many of the people who will contact you are out to make money from your situation and are looking for ways to get at the equity that you have in your house. For this reason, you should be very cautious about dealing with individuals who contact you with an offer to help while your house is in foreclosure.

In many instances, a person will contact you and offer some type of foreclosure relief or offer you some type of solution that they state will allow you to remain in your house, for example they might say, "We may be able to save your house from foreclosure". Beware of such promises! In most circumstances, entering into such an agreement could not only ensure that you will lose your home, but also could result in you losing all of the value or equity in your home.

Can you give me an example of a foreclosure "scam"? +

Examples of such foreclosure "scams" include a proposal where you agree to sell your property to investors or other people and they lease it back to you with a promise to let you buy back the house at some point in the future. Many times, the people or companies do not put the agreement (in this example, called a "sale/lease-back" option) in writing or have you sign papers that are different from what they tell you they are going to do. If they do put the agreement in writing, it is important that you not sign the document until you have someone review it, preferably an attorney. If they insist that you sign immediately, or do not want to give you copies of the agreement to review at your leisure nor provide you with an address or telephone number or any other information about themselves, be extremely cautious about doing business with them!


Many times, the person will ask you to sign a document called a "deed," which can be either in the form of a Quitclaim Deed or Warranty Deed. If you sign either of these, you give up all your rights of ownership in the house and any verbal agreement or representations may not make any difference.

Also, be aware of a rise in fraudulent "mortgage rescue" companies claiming to offer the following:

  • Loss Mitigation Consulting
  • Foreclosure Prevention
  • Mortgage Loan Modification, and/or 
  • any related service where the company is offering to negotiate your loan with your lender in exchange for upfront fees.

Seeking or accepting help from these fraudulent and unlicensed companies can end up costing you a lot of time and money in an already difficult situation without receiving any help in return. In many instances, homeowners who fall victim to a loan modification scam pay thousands of dollars and do not receive any help and are left facing a foreclosure sale without any representation.

If you come across this type of company, please report them to the Colorado Attorney General’s Office.


Because foreclosure is confusing, people who solicit you may give you information that is not true and lead you to believe that you have no rights now that your house is in foreclosure. It is important to note that you do have rights in a foreclosure.

How can I avoid foreclosure scams? +

Contact your mortgage lender and continue to contact your lender during the foreclosure process. Learn about the foreclosure process in Colorado and reach out to the Public Trustee's Office for information about your sale. Seek counseling from a legitimate non-profit housing counseling agency. If you make an agreement during the foreclosure process, make sure it is in writing and never sign anything if you are pressured into signing it. Also, don't make verbal agreements since they are difficult to enforce. Read and understand all documents, preferably with the help of an attorney, before signing anything.


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The following information is provided by Colorado Legal Services. It is intended as general information only, and is not meant as legal advice for any specific situation. If you need legal advice, consult an attorney.

If you need advice on this or any other legal problem, contact an attorney of your own choosing. If you cannot afford an attorney, talk to Colorado Legal Services: 303-837-1321.

Last Review and Update: Nov 02, 2018