Some groups advertise themselves as “counseling agencies” and legitimate counselors do exist. After all, the Bankruptcy Code requires that debtors work with a counseling agency prior to filing for bankruptcy.

Even though some of these agencies are funded by credit card companies, they are not scammers. HUD also provides a list of qualified counselors. Visit their website to find a counselor find a counselor in your state.

A phony counseling agency finds your name on the public record of delinquent homeowners and contacts you offering to perform certain services for a fee.

Many of these "services" can be found in website and can be done yourself for free. You do not need to pay a counseling agency a fee to negotiate a new payment plan with your mortgage company nor do you need a counseling agency to pursue a pre-foreclosure sale.

Contact an attorney or speak with your lender before you pay anyone or sign anything.

Foreclosed homeowners often don’t know where to turn for help, and some fall into the hands of scammers calling themselves "Foreclosure Mediators" or "Foreclosure Counselors."

There are many legitimate organizations that provide assistance for homeowner’s in foreclosure, some non-profit. It’s the bad one’s I’m writing about here.

How do they work?

• A website is set up by the scammer offering to negotiate with the lender on behalf of the homeowners.
• The homeowner submits an application to the "Foreclosure Mediation Service" (or whatever they happen to call themselves.”
• They "carefully" review the homeowner’s file and after due deliberation decide they can assist the borrower by structuring a workout with the lender. No matter how bad the borrower’s situation, they promise they can solve the homeowner’s problem. Of course, the homeowner must first submit a non-refundable fee.
• After the fee is paid, nothing happens.

If the homeowner is able to reach their "counselor" on the phone, they state that the case is extraordinarily difficult and the fee paid was only enough to start the process. For more money, they promise to continue diligently pursuing a solution. Or, the scammer may state the lender refused the workout proposal, and nothing further can be done.

Whether the borrower pays the scammer more money or gives up, the money paid is gone. And that’s the point of the scam: collect an upfront fee and do nothing.