In my law practice, I get more calls than I should from desparate homeowners in foreclosure who paid a lot of money - often many times (like 10 to 20 times) what I charge for actual legal services from a real live lawyer - to some company who sent them direct mail or cold called them.

The story goes like this: homeowner in default gets an unsolicited contact, is told what they want to hear: their house can be saved, etc., homeowner forks over thousands of dollars up front, which they have because the lender stopped taking their payments when they fell behind, and now, three months later, homeowner learns that their house will be auctioned in a couple of weeks. Meanwhile, the foreclosure consultant (and the homeowner's money) is nowhere to be found.

Minnesota's Attorney General just filed suit against two such outfits, in their home states of Florida and New Jersey. Overall, the Minnesota A.G. has filed ten such suits in the past year. While this is great news for some, the sad truth is that it's just a drop in the bucket, as there are probably thousands of scam artists preying on growing homeowner desparation.

California has several laws designed to protect vulnerable homeowners from scam artists who prey on the desparation of people at risk of losing their homes. There are two types of activity that are covered under the law: "foreclosure consulting," which is any activity outside a bona fide attorney-client relationship where a consultant purports to offer assistance or advice to a homeowner in default regarding their foreclosure, and "equity purchasing," which is any type of investment activity between an investor and an owner in default, other than a traditional bona fide financing transaction.

Foreclosure consultants and equity purchasers are required to give specific disclosures, and a three day right to cancel form, to homeowners. Homeowner rights under these laws cannot be waived, and any waiver provision in a contract is void and could be deemed a violation of the law. The consultant or equity purchaser cannot require the homeowner to pay an up front fee - payment is not due until after the consultant or equity purchaser does everything they promised to do. In an equity purchase, the homeowner cannot be required to sign any transfer document like a Deed or Option Agreement until after the equity purchaser has fully performed.

For homeowners caught in a bad deal with a consultant or equity purchaser, call your District Attorney. Most California DAs have task forces to deal with this type of consumer fraud. But remember, time is your enemy, so make the call right away.