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Real estate transactions have always been prime targets for fraudsters, and with the advent of technology, they've only gotten more creative. One of California's most common forms of mortgage fraud is so-called "phantom help" schemes that falsely promise to rescue homeowners facing possible foreclosure.

A phantom help scam is one of the most common types of California mortgage and . It can be generally described as any deliberate false representation related to any portion of a real estate transaction.

Phantom help scams are prohibited under California Civil Code 2945.4, the foreclosure fraud law. Violations occur when a foreclosure consultant, or someone claiming to be one, promises to help a distressed homeowner delay or even prevent a pending foreclosure from occurring but does nothing to follow through with that promise.

Civil Code 2945.4 says, “It shall be a violation for a foreclosure consultant to:

(a) Claim, demand, charge, collect, or receive any compensation until after the foreclosure consultant has fully performed each and every service the foreclosure consultant contracted to perform or represented that they would perform.”

California law is quite strict regarding these types of schemes. You could face significant fines, jail time, and restitution if you're charged with a crime and convicted due to a phantom help scheme.


Phantom help refers to services or assistance promised by individuals or companies to distressed homeowners.

Typically, these entities pose as "foreclosure consultants" and claim they can renegotiate the homeowner's mortgage, save their home from foreclosure, or provide other "too good to be true" solutions.

However, in most cases, they demand exorbitant fees for minimal work or, worse, do nothing. This leaves the homeowner in a worse financial situation than before.

Civil Code 2945.4 CC is designed to protect desperate, vulnerable homeowners from being prey. This law prohibits foreclosure consultants from engaging in certain types of behaviors (phantom help), such as the following:

  • Charging compensation before their promised work is done;

  • Charging fees over 10% per year of any loan;

  • Acquiring any interest in the owner's foreclosed home;

  • Acquiring any interest in other property;

  • Acquiring a lien against the owner's wages;

  • Taking the owner's power of attorney;

  • Accepting payment for services from a third party without notification;

  • Agreement to help the owner arrange the release of surplus funds after the trustee's sale is conducted.

  • Persuading the owner into a contract that violates Civil Code Sections 2945.2 and 2945.3.


Phantom help scams can take many forms within California's real estate industry. Some of the most common are discussed below.

Foreclosure Rescue Scams

These scams target homeowners facing imminent foreclosure. The "phantom helper" promises to take steps on their behalf to delay or prevent the bank from foreclosing, typically charging hefty fees upfront but then doing little or nothing to fulfill that promise.

Foreclosure rescue scams are one of the most common phantom help schemes.

The victim usually does not realize they've been scammed until all deadlines have passed, and foreclosure is inevitable.

Loan Modification Scams

In this type of scam, the scammer poses as a "mortgage modification specialist" (or a similar title) and claims to provide a loan modification service that will lower monthly mortgage payments, typically by negotiating for lower rates with the lenders.

The scammer often convinces the homeowner to make modified mortgage payments directly to them rather than the lender since the "helper" is negotiating on their behalf. In reality, the scammer pockets the money, makes no payments, and foreclosure proceeds.

Phony Deed or Rent-to-Own Scams

This scam targets prospective homebuyers who lack knowledge of how the homebuying process works.

The scammer falsely markets a home under foreclosure to the unsuspecting buyer, collects a down payment, then presents a phony deed to the house and collects rent from them, typically under the pretense of rent-to-own.

In reality, the home is going through foreclosure, and at some point, the new legitimate owners show up—at which point the victims discover they have no ownership and are forced to leave.


Suppose you're accused of participating in a phantom help scheme. In that case, prosecutors will likely charge you with a crime under foreclosure fraud (Civil Code 2945.4) or grand theft defined under Penal Code 487 PC, depending on the facts of the case.

Both crimes are "wobblers" under California law, meaning prosecutors may charge them as a misdemeanor or a felony.

The penalties for a conviction are similar under both laws. Either way, being convicted for participating in a phantom help scheme can lead to a broad range of penalties, some quite severe. The penalties may include the following:

  • You could face up to one year in county jail for a misdemeanor conviction;

  • For a felony conviction, you face 16 months, two years, or three years in jail;

  • For either a misdemeanor or felony conviction, you can be fined up to $10,000.


If you are convicted, the court may order you to pay restitution to the victims of your crime. This can include both monetary losses and emotional distress or pain and suffering.

Restitution payments could be pretty significant depending on the facts of the case. This restitution also does not prevent the victim from filing separate civil lawsuits against you for additional financial damages.

Possible add-on penalties

You may be subject to additional jail or prison time, such as one to four years if the victim lost more than $65,000 and one to five years if they lost more than $100,000 and you are convicted of multiple counts.

These add-on sentences occur consecutively, not concurrently, which can significantly increase your incarceration time. Under these circumstances, fines can also be enhanced up to $500,000 or double the amount of the loss, whichever is greater.


While being accused of a phantom help scam is a grave matter, there are possible defense strategies experienced by a California criminal defense attorney, as discussed below.

Perhaps we can argue there was no fraudulent intent. Your attorney may argue that you didn't willfully commit fraud.

For example, if you legitimately performed the agreed services and collected money after the fact, but those actions weren't enough to prevent foreclosure, you may be able to avoid conviction.

Collecting money before foreclosure services is considered fraud under California law, so if you collected in advance, you may be unable to claim this defense.

Perhaps we can argue there was legitimate consent to transact. Suppose you made promises to the homeowner that you legitimately intended and attempted to fulfill, and you received consent from the owner to transact business based on those promises. In that case, you should not be convicted of phantom help fraud.

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