By Christopher Solomon

...from MSN.com

Mortgage fraud is on the rise. More than 323,000 properties entered some state of foreclosure in the first quarter of 2006, a 72% increase over the same period a year ago, according to RealtyTrac. Things could get worse: Nationwide, more than one in three outstanding mortgages has an adjustable rate and interest rates have been rising. "Nobody really knows what’s going to happen," says RealtyTrac’s Rick Sharga, VP of marketing.

Scammers know that people in trouble make easy victims. They’re swooping in and offering to "help" borrowers, ending up with their homes. Victims sometimes spend years fighting to get their homes back and some never succeed. Here’s a look at three ways scammers can steal the roof over your head.

Scam No. 1: The bailout, aka ‘equity stripping’ In theory, a person or company could help a homeowner keep his house via a process in which the homeowner sells the house very cheaply to them while the homeowner gets his finances in order. The new owner pays the mortgage, and the old homeowner pays to live in the home in the meantime, buying back the home (with interest) in a fixed amount of time. If the financial setbacks are temporary, and the company is above-board, everybody can win: The homeowner keeps the house and the company earns a profit for its role as rescuer. But "reconveyance," as it’s sometimes known, is ripe for abuse.

Attorney Leah Weaver, who fights the scams as an Equal Justice Works Fellow at the Legal Aid Society of Minneapolis, explains how this works. Suppose you’ve got a $200,000 home, with $100,000 of equity. Medical bills have you facing foreclosure. Suddenly, the phone rings with a bailout proposal. So you sell your home, for $120,000 — not much more than what’s owed on the mortgage. Why sell for so little? "Because it’s never intended to be a true sale," Weaver explains; remember, you don’t think you’re selling the house permanently, but buying it back in a short period, right?

The new purchaser, takes out a $120,000 loan, wipes out any liens on your property and even gets you a little cash back; and you get a two-year lease with a purchase option at the end. But soon you realize you’re in trouble. Why? Because scammers aren’t about to let you get your home back. Often, the lease terms desperate homeowners agree to turn out to be as onerous as their previous mortgage payments that helped get them into trouble. Con artists also manipulate victims when facing crucial deadlines.

"My client was told payments were going be to $1,000 a month," Weaver recalls. But the criminals dragged out the process until the foreclosure was imminent and she was backed into a corner. "When she got to the closing they said, ‘Oh, no, the payments are going to be $1,150.’

"Inevitably," she says, "you’re going to default."

And default isn’t pretty. The new purchaser evicts you as soon as possible, sells your $200,000 house, pays off the $120,000 loan and pockets about $80,000 — all for a few months’ work, says Weaver. Some people don’t even fight back because they don’t know they have options — such as calling a lawyer, says attorney Dollar.

Do’s and don’ts:

• Don’t fall for promises like "We’ll save your credit"; "We’ll buy your house ‘as is’"; or "We’ll get you a new mortgage with low monthly payments."

• Don’t sign away ownership of your property (sometimes called a "quit claim deed") to anyone without the advice of lawyer you trust. When people get behind on their loan payments, they get a bit desperate, but the answer is not putting someone else on your title.

• Beware of any home sale contract where you aren’t formally released from liability for your mortgage. Also, make sure you know what rights you’re giving up and that you agree to giving them up.

Scam No. 2: Phantom help -- This scheme is fairly simple: Let’s say you’re way behind on your home payments and facing foreclosure. An individual or group approaches and offers to help — then charges you thousands of dollars for various administrative duties like filing forms and phone calls, or else keeps simply promising a big rescue later. You can probably guess what’s really going on: The "helper" isn’t really doing anything at all to stop your foreclosure despite collecting thousands from you. By the time you figure out you’ve been hoodwinked, it’s often too late to stop the loss of your house.

How did the scammer know to target you, anyway? That’s easy: When a lender schedules the home for public auction, the matter becomes public record. In just more than half of the states, a lawsuit must be filed in order to spur a sale. Anyone can check the court documents to find the list of lawsuits, says Elizabeth Renuart, an attorney with the National Consumer Law Center and co-author of a major report last year on mortgage fraud called "Dreams Foreclosed." Soon, a letter or phone call comes like something from a guardian angel — only it’s a vulture.

In the other states (including California and Massachusetts, for example), the process doesn’t go through the courts; foreclosure sales simply must be advertised publicly, as in the local newspaper. This latter process usually moves faster — and makes an already-stressed homeowner even more vulnerable to a scam, says Renuart.

Do’s and don’ts:

• Do call your mortgage company or lender if you’re in trouble. Ask for the loss mitigation department. Contrary to popular perception, lenders don’t want to steal your house, says attorney Dollar. They want to work with you. Why? "Lenders always lose money on foreclosures, even in a rising market," Dollar says. Scammers, on the other hand, will try to keep you from communicating with your lender.

• Don’t call for assistance from one of those ubiquitous signs on telephone poles that advertise help. Chances are, that’s not where help lies.

• Do proceed with caution, if a company or person:

o Describes itself as a "mortgage consultant," "foreclosure service," or something similar;

o Collects a fee before giving any services;

o Advertises to people whose homes are listed for foreclosure, including anyone who sends flyers or solicits door-to-door; and

o Says you should make home mortgage payments directly to them or to their company instead of your mortgage lender.

• Don’t panic. Get full information on the foreclosure process in your state. Make sure you know ALL deadlines — for court, for document filings, etc. States usually have associations that can offer free advice. Minnesota, for example, has the Minnesota Housing Finance Agency as well as the Minnesota Mortgage Foreclosure Prevention Association, which has federal Housing and Urban Development counselors available.

Scam No. 3: The bait-and-switch -- In this scam, which NCLC calls the "bait-and-switch," con artists actually trick a homeowner into signing over the deed to a home — without his knowledge. How could somebody fall for this?

Attorney Hand gives an example. Hand is dealing with 10 cases involving the same real estate loan broker, Kaseem Mohammadi of Union City, Calif., who has been charged with 13 counts of real estate fraud. One of Mohammadi’s strategies, Hand says, was to visit his alleged victims armed with a load of documents on a clipboard and places marked with Post-It notes indicating where to sign. His victims — some of whom were elderly, or didn’t speak English well — were usually overwhelmed by the documents and also couldn’t exactly see what they were signing thanks to the clipboard. And one of the things Mohammadi allegedly got them to sign was a "grant deed" that passed their home’s title to a third party.

You don’t have to be old or a non-English speaker to be stymied by the legalese. Attorney Renuart says she has seen shysters get their victims to sign incredibly complicated legal documents that resulted in their property being transferred to entities such as trusts. "These trust agreements, I can’t understand them — and I’m a lawyer."

And if a criminal can’t get the signature? Forgery goes a long way in real estate these days, experts say.

• Don’t sign anything that has any blank spaces. Information could be added later that you didn’t agree to. (Yes, it happens.)

• Never sign a contract under pressure. Always know exactly what you’re signing. Take your time to review the paperwork thoroughly — ideally with a lawyer who only represents your interests.

• Never make a verbal agreement. Get all promises in writing and get full copies.

• Cast a jaundiced eye at deals that sound too good to be true. Lately, some scam artists promise they’ll wipe out or pay off your home’s debt for you (so-called "debt elimination"). Some flustered homeowners bite. Just remember the free lunch rule: There isn’t one.

A final thought: Remember, if you can’t fix your finances, selling your house (on the normal market, that is) may not be the end of the world. Sure, you’ll be a renter again. But given how much homes around the country have appreciated in the last several years, chances are you’ve made some money, which you can use to get back on your feet.