Every day, loan modification and foreclosure rescue scams rob vulnerable homeowners of their money and their homes.  Housing counselors can help fight back and put a stop to these crimes.

The U.S. Department of Housing and Urban Development (HUD) Office of Inspector General (OIG) is the Department’s law enforcement arm and is responsible for investigating complaints of mortgage fraud.  We are working with HUD's Federal Housing Administration (FHA) and HUD-approved counseling agencies to identify scams, stop cases of suspected fraud, and prosecute the perpetrators.

The following are types of scams we are investigating and the red flags that can alert you to situations that should be reported to us.


• Phony Counseling Scams

The scam artist says that he or she can negotiate a deal with the lender to modify the mortgage — for an upfront fee.  Scammers often guarantee or promise that they can secure a loan modification or refinance.  They frequently advise homeowners not to talk with lenders or other counselors.

• Phony Foreclosure Rescue Scams

Some scammers advise homeowners to make their mortgage payments directly to the scammer while he or she negotiates with the lender.  Once the homeowner has made a few mortgage payments, the scammer disappears with the homeowner’s money.

• Fake "Government" Modification Programs

Some scammers claim to be affiliated with, or approved by the government.  The scammer's company name and Website may appear to be a real government agency, but the Website will end with .com or .net instead of .gov.  The scammer may also use terms like “FHA,” "HAMP," "HARP," or other words related to official U.S. Government programs.  Fraudsters may also illegally use the FHA or Treasury Department seals in their advertising, solicitations, or Websites to give the impression that they represent a government agency and gain the trust of their victims.

• Forensic Loan Audit

Advance fees for loan counseling services are prohibited,  so scammers may sell their services as “forensic mortgage audits.”  The scammer will say that the audit report can be used to avoid foreclosure, force a mortgage modification, or even cancel a loan.  The fraudster typically will request an upfront fee for this service.

• Mass Joinder Lawsuit

Most advance fees for loan modification or foreclosure rescue services are prohibited.  One loophole is for attorney’s fees.  One trend in loan modification and foreclosure rescue scams is the affiliation of scammers with unscrupulous attorneys.  The scam artist, usually a lawyer, law firm or marketing partner, will promise that he or she can force lenders to modify loans. The scammers will try to "sell" participation in a lawsuit against the mortgage lender, claiming that the homeowner cannot participate in the lawsuit until he or she pays some type of upfront fee.

• Rent-to-Own or Leaseback Scheme

The homeowner surrenders the title or deed as part of a deal that will let the homeowner stay in the home as a renter and then buy it back in a few years. However, the scammer has no intention of selling the home back and, instead, takes the monthly “rent” payments and allows the home to go into foreclosure.

•   Short Sales

o Short sale frauds, also known as flopping, are a new trend.  Short sales are legal.  In fact, new government programs such as the Home Affordable Foreclosure Alternative program offer cash incentives to borrowers and lenders for approved short sales as alternatives to foreclosure.  In a short sale, the lender agrees to take an amount less than the balance of the mortgage in satisfaction of the mortgage.

o Short sales flopping involves fraudulently under appraising a home to convince the lender to take an amount less than the real fair market value of the house as satisfaction of the mortgage.  The house is then “flopped” at its true value, netting a profit to the short seller, and causing a larger loss to the lender or FHA.

How You Can Help:

Housing counselors are on the front line of the fight to maintain integrity in mortgage programs. Be on the lookout for the frauds detailed above, and report suspected fraud to HUD-OIG or the Federal Bureau of Investigation.

Where to Report:

For FHA borrowers, report to the HUD Office of Inspector General. 

  HOTLINE Reporting Form: https://www.hudoig.gov/report-fraud
  You must submit a complaint to refer the matter for investigation.


For non-FHA loans, you may send reports to:

  Federal Bureau of Investigation
  Phone: 1-800-CALLFBI (225-5324)
  Online Tips: FBI Tips and Public Leads Form at https://tips.fbi.gov/)


The online versions of nearly all OIG documents are presented in Adobe's Portable Document Format (PDF). To view documents, you can download Adobe Reader for free.