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Consumer Warnings – Frauds and Scams

The possibility of losing a home to foreclosure can leave homeowners feeling frightened and desperate. Many unscrupulous companies and scam artists are taking advantage of this vulnerability by peddling fraudulent loan mod services, loan audits, class actions/mass joinder, trustee postponement services, and other predatory schemes. Most of these schemes are quite sophisticated, and almost all require upfront payments or monthly payments, which are illegal in California. The fraudsters entice homeowners with promises of relief and guaranteed results but they ultimately cannot deliver. As a result, homeowners are left in worse shape - both financially and emotionally. Having wasted precious time and money, they face foreclosure, eviction, and deficiency judgments.

Don’t Become a Victim!

Please familiarize yourself with the following list of the most prevalent foreclosure-related scams that are currently being investigated by the Attorney General of California, the State Bar of California, and the California Department of Real Estate. By law, all individuals and businesses offering mortgage-foreclosure consulting, loan-modification, and foreclosure-assistance services must register with the Attorney General’s office and post a $100,000 bond. It is also illegal for loan modification consultants and businesses to charge up-front fees for their services. The Attorney General has sought court orders to shut down hundreds of fraudulent foreclosure-relief companies and has brought criminal charges and obtained lengthy prison sentences for dozens of deceptive loan modification consultants. The Department of Real Estate has investigated more than 2,000 complaints involving loan-modification scams. Nearly 350 individuals and companies received a Desist and Refrain Order to stop illegal activity.

If you are in doubt about any solicitation you receive, please call us. Lawyers Realty Group offers a free legal review of all solicitations from realtors, lawyers, brokers, investors, and others to help you determine the validity and viability of the claims being made. There is no obligation or commitment. The call could save you from a devastating misdirection.

Consumer Advisory: Real Estate Scams & Red Flag Warnings


In 2009, California passed SB94 which prohibits individuals and companies from charging up-front fees or monthly fees for loan modification services. This prohibition INCLUDES attorneys. Yet homeowners facing foreclosure are being targeted every day by charlatans peddling phony loan modification services and demanding payment in advance. Many are using their law licenses to garner credibility and gain the trust of increasingly desperate homeowners.

Taking money upfront for loan modification services is a sure sign of fraud.

Despite limited resources, the Attorney General’s office and the Department of Real Estate have shut down and/or arrested thousands of illegal operators, including a large numbers of attorneys. A significant number of attorneys have been disbarred. The Department of Real Estate has suspended more real estate license holders in the last 8 years than they have in the last 3 decades combined. For more information about the blatant and widespread nature of loan modification fraud, including news releases and consumer warnings from the Office of the Attorney General, please see the Articles section of our website.

If you are interested in obtaining a loan modification, there are complex financial analyses dealing with Front-End Debt-to-Income ratios and Net Present Value that you need to understand. Please visit and search for “Understanding Loan Mods” to get a more complete description of the process. Then, use our free “Loan Mod Traffic Light” on the home page to run your own loan modification numbers. If you work with anyone who does not run these numbers first, then they are almost certainly running a scam.


Trustee postponement services are another SCAM used by loan mod companies and lawyers alike. For an up-front fee or monthly fee, these companies claim to be able to force the foreclosing trustee to postpone the foreclosure sale by writing letters and challenging the foreclosure process. Foreclosure trustees, however, simply ignore these letters because they only take direction from the lenders.

Foreclosure trustees only respond to COURT ORDERS or BANKRUPTCY filings. Ask the scam artist for a copy of what they intend to send to the trustee. Most will not allow you to see what they will be sending. They will claim it is “proprietary” – which, in reality, means they don’t have anything. In the best case, these scam artists are just sending useless letters that get thrown away. In the worst case, we have seen these people file illegal bankruptcy actions without the homeowner’s knowledge just so they can keep collecting the monthly fee while the bankruptcy court tries to uncover the fraud. Once the homeowner realizes what has happened, it is too late to unwind the mess. The home is lost to foreclosure, and the homeowner has to report the bankruptcy for 10 years.

This type of fraud almost always destroys the possibility of seeking a more advantageous solution for a homeowner facing foreclosure such as a short sale, which costs the homeowner nothing and allows the homeowner additional time in the home along with a cash relocation incentive from the bank.


These PROVEN SWINDLES have landed a number ofattorneys IN JAIL. Search for “loan audit” or “mass joinder” on the Attorney General’s website at

Typically, this scam is run as a company offering a "forensic loan audit", “securitization audit” or a “mortgage violation audit” for an up-front fee (of course – see the pattern). This is another tactic used to get around the prohibition on up-front fees for loan modifications. Most of the scam artists will charge a large fee for the audit but then pitch that they will do the loan modification work for “free” or that they will refer you to an attorney to file litigation based upon the findings in the loan audit. Not only is this an illegal fee structure, but it is completely useless. According to the FTC, there is absolutely no evidence that forensic loan audits are of any benefit in obtaining a mortgage modification or other mortgage relief. These "audits" are generally of no value whatsoever and often contain information that is wrong, misleading and does not accurately reflect the state and federal laws they supposedly address.

Every single audit will show some type of violation of the Truth-in-Lending Act (TILA) laws or a violation of the Real Estate Settlement Procedures Act (RESPA). What these scam artists don’t tell you is that there are significant legal hurdles to bringing a claim under TILA or RESPA and that you might be forced to pay all the past due amounts or even “tender” the entire loan amount to be heard in court. That simply is NOT going to happen and you will quickly lose your case and waste a large amount of money on the lawyer.

The California Attorney General joined the California Department of Real Estate (DRE) and the State Bar of California in warning Californians to avoid forensic loan audits, which they called “the loan-modification industry's latest phony foreclosure-relief service in which homeowners pay up-front fees for a forensic review of their lender's practices, but are provided no actual foreclosure relief.”

"Forensic loan audits are yet another phony foreclosure-relief service hawked by loan-modification consultants trying to cash in on the desperation of homeowners facing foreclosure," the AG said. "The foreclosure-relief industry continues to be long on promises, but short on results."

Thousands of homeowners were left in dismay when the law firm of Kramer & Kaslow was taken over by the Attorney General and when US Loan Auditors was shut down. These law firms and loan auditors were all pitching the mass joinder/class action scheme based upon useless loan/securitization audits. Innocent people, already battered by the housing crisis, were targeted for fraud in their moment of distress and were left with no options when the fraud was discovered. All the money they paid was lost.


Whenever there are sharp fluctuations in real estate prices, you will find real estate investors trying to take advantage of the price movement. There is nothing wrong with investing in real estate, but there are many investors who are using deception and fraud to secure their gain. Homeowners are reporting that “all cash buyers” are knocking on their doors and leaving hand written notes saying that the buyer and his or her family really love the home and are willing to buy it right away for all cash. The pitches vary. Some ask for the homeowner to deed the home to them without telling the lender. Some say they will rent the home back to the homeowner for some time after the purchase is complete. These are clear indications of FRAUD.

Any real buyer of a home in foreclosure knows that they will need to either get lender approval, or they will need to somehow stop a foreclosure from proceeding. However, these underhanded investors try to bypass the entire system and go behind the lender to secure profit. Any sale of the home for an amount that does not pay off all the loans and other liens is considered a short sale. If the investor intends to buy the home in that short sale, then ALL parties will be required to sign an “Arm’s Length Affidavit” under the penalty of perjury stating that the owner does NOT have the right to stay in the home, rent it back or buy it back after the sale is complete. Violation of this affidavit is considered Bank Fraud and carries a 30 year prison term and a $1 million fine. Other investors are merely trying to tie up the property so that it ends up in a foreclosure auction where they can buy it at a steeply reduced price compared to what they would have needed to pay the homeowner and the bank in a regular sale.

Still other investor scams are based upon getting a monthly fee from the homeowner by promising to enter into a “transfer/rent back” arrangement. Con artists entice you to transfer the title of your home to them with promises of new deal with you once the bank is out of the way. In actually, they are just collecting a monthly fee from you while the foreclosure continues. By the time the homeowner realizes that this is a scam, they are on the eve of foreclosure and are unable to seek another more successful exit from the property without liability. In the worst cases, the homeowners do not discover the fraud until the sheriff knocks on the door to evict them, weeks or months after the foreclosure had already been completed.

The ugliest and most dangerous of these scam investors are those who want to purchase the home in a short sale just so they can quickly resell to a ‘real’ buyer after their purchase. This type of property flipping has been dubbed “flopping” by the authorities because it relies almost exclusively on fraud rather than the skill needed to rehab a home and sell it for profit. These scam artists say they will take care of all the communications with the bank and you don’t have to worry about it. The only way this fraud works is if the investor lies to the bank about the value of the property so they can undercut the purchase price. Once they buy it in the short sale, they kick out the homeowner as quickly as possible and sell the home to someone else at the real fair market value. If these investors offer the homeowner money for their compliance, then the homeowner becomes part of the bank fraud. That crime carries a 30 year prison term and a $1 million criminal penalty.

If you wish to sell your property in a short sale, do not permit a buyer to convince you work directly with them. A short sale is a legal settlement of the mortgage default with your lender, and you will have contract obligations during the transaction that can expose you to further liability. You must retain the services of an Attorney/Realtor® to fully protect your interests in this process. This is a very safe and secure exit from the property without liability as long as you use an Attorney/Realtor®. There is no cost to you for these services, and the banks are now paying significant cash incentives for your cooperation.


This scam is very prevalent right now because most homeowners understand the need for legal representation but cannot afford it. Therefore, loan mod companies, real estate agents and others are now claiming to be “affiliated” with a law firm or they claim to have “on staff” attorneys to help the homeowner. That type of arrangement is unethical and illegal. You must be working directly with an attorney to have a valid attorney-client relationship. You can’t “piggy back” on someone else’s attorney even if that attorney works for, or with, your real estate agent. Those attorneys represent the person who they work for, not you. If a real estate office has an in-house attorney or if they hire an attorney as a “short sale negotiator,” those attorneys are barred from representing your interest because they already represent the company that hired them.

Make sure that you are dealing directly with a licensed California attorney and that you have a legal engagement letter directly with that attorney. If you haven’t signed a legal engagement letter, you are not being represented by that attorney. When you work with Lawyers Realty Group, you are being PERSONALLY represented by a real estate lawyer and there is no cost to you for this protection. Your lender pays all fees. Please visit and search for the article “Real estate agents are not qualified to do short sales.”

For many homeowners, a short sale is the most effective foreclosure alternative. You can stay in your home well past the scheduled foreclosure date while we market and sell your home and then negotiate the short sale. You will also be protected from lender lawsuits, eviction actions, deficiencies and collections once the short sale is completed. The short sale costs you nothing, and the lender will pay you a CASH INCENTIVE FOR YOUR COOPERATION!

Only an Attorney/Realtor® can provide the protection you need when confronting the banks and other creditors. As a Real Estate Attorney and California Realtor®, I have listed and closed hundreds of short sales and secured thousands of dollars in cash incentives for homeowners. I know how utilize the full force of California law to stop the foreclosure, close the short sale and maximize every possible advantage for our clients.

A mortgage default has serious legal, tax and contractual implications. A short sale can resolve all of those issues if handled correctly. As an Attorney/Realtor®, I’m able to represent you in every aspect of the short sale, from listing, marketing and selling your home to drafting your contract, reviewing the short sale approval letters and approving the Arms-Length Affidavit which you will sign under penalty of perjury. I’ve also created a PROPRIETARY CONTRACT ADDENDUM that protects you in the short sale. You are completely protected when Lawyers Realty Group lists and sells your home. We ensure that the close of your short sale definitively eliminates any and all future liability.


The Internet is full of lore about someone getting their home free & clear of the mortgage because the bank couldn’t produce the note or because MERS was involved in the transfer of the loan documents. This is an absolute, 100% losing argument in California. Dozens of cases have held that these arguments do not stand. Please visit and search for “MERS” to review all the cases and court holdings on this issue. Any company that promises to cancel or rescind your loan by using legal loopholes (like “produce the note” or the MERS argument) or by finding "violations" of REPSA or TILA in your loan documents should be considered highly suspect. If they then ask for an up-front fee or monthly fees, it is almost certainly a fraud.

These types of services are almost always cons perpetrated against frightened and desperate homeowners. Ask any lawyer who is making these promises to take your case on contingency. Then you will learn how little they believe in their ability to get the results that they promise. They will demand up-front payments, large retainers or monthly fees. These cases end in failure, and the lawyers need to collect their money up-front because no one will pay them after they lose in court.

Even worse, if you lose, all the costs and fees expended by the bank in defending your losing case will be charged against the home, or the judge could order you to pay the bank’s legal fees. Once you discover the fraud, it will be too late to explore other, more protective alternatives to foreclosure.


Trial payment plans ("TPP") and trial modifications are proving to be a FRAUDULENT BANK TACTIC to collect as much money as possible from borrowers just before denying a permanent loan modification and completing a foreclosure. Most of the time, it is the servicer of the loan that is pushing for the “trial payments” because they can actually collect their servicing fees from those trial payments. Until then, they are not making any money on servicing that loan. Once you start your trial plan, they will at least have some cash flow on your loan.

Most of the Trial Payment Plan letters read like a pre-approved credit card offer: You are “pre-approved” for the plan, please start making payments of some fixed amount and we will come back in three months and let you know if you got a modification. The trial payment amount is usually very reasonable (so low that it can NOT be offered if a mod would even be available). Typically, the servicer doesn’t have an answer after the 3-month trial plan and just suggests that you keep making the payment until an answer comes in.

After about 9 months, the homeowner receives a letter stating that the modification is denied and that the homeowner is seriously delinquent (because the trial payment was much lower than the regular payment). Foreclosure is usually commenced right away and the homeowner loses the home shortly thereafter.

All homeowners say the same thing: “I wouldn’t have gone that far in default if I thought they were not going to offer the modification, but now I can’t come up with the money they are demanding to stop the foreclosure.” Hundreds of people are being taken in by this ploy every month.

You must know the numbers being used by the lender to determine if you can get a loan modification. Please visit and click on the “Loan Mod Traffic Light” to get a free analysis of all the loan modification numbers. Don’t waste time and money on “trial payments” to the servicer if they will never approve your modification.

Don’t get trapped by this BANK CREATED, GOVERNMENT ENDORSED SCHEME. I can review all trial modification documents to ensure you are protected.

Please see the Articles section of our website for more information about the arrests and lawsuits being brought against those who victimize desperate homeowners. Be on alert for any of the Red Flags below and contact Lawyers Realty Group before you make any decisions, pay any money, or sign any documents. The free legal advice you receive today can spare you from further financial harm and untold misery in the weeks and months ahead.

Red Flags & Warning Signs of Fraud

  • Anyone asking for money up-front or on a monthly basis. This includes attorneys asking for an up-front “retainer” to do any loan modification work or litigation that should be on contingency.
  • Anyone telling you that you are qualified for a loan modification without reviewing the Front-End Debt-to-Income calculations and running a Net Present Value test on your property.
  • Any individual, company or lawyer that offers you a money-back guarantee or otherwise guarantees results. Attorneys in California are prohibited from offering guarantees to their clients.
  • Any company that pressures you to hire them right away or gives you a high-pressure sales pitch.
  • A claim that you don’t need an attorney (especially if coming from a real estate agent pushing a short sale).
  • ANY claim that you can rent back your home after a short sale or foreclosure.
  • ANY requirement to transfer your property to another person or to a trust.
  • Offers to buy your house for cash.
  • Any claim by a non-attorney to postpone the foreclosure process. All “trustee postponement services” are clear scams.