In a recent issues of the Wall Street Journal, there was an article about the latest mortgage fraud issues surrounding the "save your home from foreclosure" scams.  According to RealtyTrac, a foreclosure data service, more than one million borrowers have gone into foreclosure so far in 2006.  This represents a 27% increase from the same period a year ago.

So with the number of foreclosures on the rise, the number of foreclosure scams have risen also.  Foreclosure fraud typical is where acompany comes in to save the borrower's home from foreclosure by buying the home and then leasing it back to the borrower for a period of 1 or 2 years, allowing the borrower to rebuild their credit and buy the home back.  This process in and of itself is not fraud, however there are many companies doing this that never intend to sell the home back to the borrower and many do not even allow the borrower to stay in the home after the sale is completed.  In most of these cases, the borrower loses most, if not alll, of their equity while being evicted from their home. 

Another type of scam to watch for comes in the form of a "foreclosure consultant".  These types of scams result from a company charging an upfront fee to supposed negotiate with the borrower's lender to postpone or avoid foreclosure.  The reality here is that many of these do not negotiate at all, and most that negotiate are doing the same negotiations you could do yourself.  If you are facing foreclosure, contact your lender and try to negotiate yourself first.  In many cases where job loss or other sudden financial crisis occurs, lenders will work with you at least for a few months.

Currently there are only 10 states that have legislation in place to deter foreclosure rescue fraud.  They are:  California, Colorado, Georgia, Illinois, Maryland, Minnesota, Missouri, New York, Ohio, and Rhode Island.  Their goal is to prohibit the charging of upfront fees before performing the agreed upon services, ensuring that homeowners receive a substantial and fair amount of their home equity when entering into a sale/leaseback transaction, and to give foreclosure investors a reasonable chance to profit, with some states saying setting a minimum percentage of fair market value for purchasing the property.  Illinois is an example of this last goal, where that require the purchase price to be at least 82% of the property's fair market value in certain cases.

Things to remember if you find yourslef in need of a foreclosure rescue service:

• Make sure the transaction is structured in an ethical manner that protects the interests of all parties involved.
• Check with a real estate attorney to determine how best to structure these types of transactions to comply with all aplicable laws.