Today, Massachusetts became the first state to permanently ban 'foreclosure rescue scams.'
Back in July, Chief Investigative Correspondent Armen Keteyian showed how this scam works: con-artists prey on homeowners facing foreclosure with the promise of helping 'save' or 'rescue' their homes. The scammer then convinces a homeowner to temporarily sign over the deed of the home to someone with better credit. The homeowner is then told he or she will be able to rent the home with the promise of buying it back in a year or so. Problem is it doesn't work. The scammer will take out a huge mortgage and then suck all the equity making it impossible to buy the home back. Furthermore, scammers can evict the original homeowner anytime, no questions asked.
There's no law that says one person can not persuade another to sign over the title of his or her home. (That is often how these bad guys are able to stay in business.) But, fraud is against the law under the Consumer Protection Act and foreclosure 'rescues' often use deception. For instance, some homeowners will be fooled into signing a bunch of documents not realizing they are in fact signing over the title to their home. But proving the fraud is not always easy. For this reason, the state of Massachusetts has specifically named 'foreclosure rescue transactions' as illegal.
Massachusetts Attorney General Martha Coakley told CBS News she hopes the law will prevent these bad guys from operating all together and hopes that other states will follow her lead.