Foreclosure prevention: Don't get scammed

NEW YORK (CNNMoney.com) -- When mortgage borrowers fall behind on payments and run the risk of losing their homes, they sometimes grab the first lifeline tossed their direction. Often that lifeline is a TV or Internet advertisement making grand promises - and has more than one string attached.

"The challenge used to be to encourage people to reach out for help," said Marietta Rodriguez, director of National Home Ownership Programs for the community organizer NeighborWorks America. "That's not the message anymore. Now it's borrower beware."

She's worried because many of the companies advertising their services charge or take up-front fees and then do little or nothing for their clients.

"There are many rescue scams that are after your business," Rodriguez said. "They're guaranteeing something they can't and charging a lot. Even the legitimate for-profit services demand a high pay-out up front."

So, if you are in trouble and need help to fight off foreclosures, you should ask several questions before hiring anyone.

1. How much does the service cost? "You should never pay a nickel for foreclosure-prevention counseling," said Austin King, a spokesman for the community organizer Acorn. "The companies that charge for this service are profit driven, not mission driven, and they can charge up to a couple of thousand dollars for doing an hour's work."

Organizations like Acorn, which has offered foreclosure counseling for 20 years, provide expert, HUD-certified caseworkers at no charge to homeowners. They're paid with funds from the government, private foundations and lenders.

2. How long has the organization performed foreclosure-prevention counseling? Longer, of course, is better. Counselors should be fully up to speed on how to handle the particular problems of their clients. Each case may be unique, but experienced counselors can apply what they've learned to other particular cases.

Not every organization has been handling foreclosure problems as long as Acorn, but if they just got into the field a few months ago, they may not yet be fully up to speed.

3. Does the counselor have a direct pipeline your servicer's mortgage-modification department? Many foreclosure counselors have established working relationships with the mortgage-mitigation specialists at the lenders. These are the people authorized to offer workouts to defaulting mortgage borrowers.

If counselors are already talking to a servicer several times a week, they know what the servicer requires and what workouts are likely to be offered. Counselors also may have established personal relationships that they can leverage to negotiate on your behalf.

Of course, almost any firm trying to win your business will say they have a direct contact. So get specific. Ask if they have a written agreement with your servicer; many have put pledges to work with foreclosure counselors down on paper. You can also ask if they work with a specific person at the servicer, someone who would have the authority to make decisions on your account.

4. Do they have an "in" with a decision maker who can override the mortgage mitigation department? Some foreclosure counselors have a servicer's VP for mortgage mitigation on speed dial. If they can't get a desired outcome from the people they usually deal with, they can call the higher-ups and sometimes get them to override decisions.

5. Does the counselor stay with you every step of the way? Often once a client is assigned a caseworker, that person sticks with the borrower throughout the foreclosure prevention process.

That's important. One of the problems that defaulting borrowers have in dealing directly with lenders is they tend to get bounced around from one mortgage mitigation specialist to the next. Filtering everything through a single counselor can save time, which is often in short supply for at-risk borrowers.

Of course, even with all those factors in place, there's no guarantee of success. Interventions can fail simply because there's nothing anyone can do. If you've lost your job and have no income, even counselors with the best credentials and intentions will be hard-pressed to help

"Not everyone should stay in the house," Rodriguez said.

Counselors, according to her, must ask themselves whether it is in the best financial interest of the borrower to hang on to a home. In some cases, people have to choose "the least amount of collateral damage," she said. That can mean borrowers stop trying to keep homes they simply can't afford under any viable plan and leaving homeownership behind.