Now Playing: Fed Fights Housing Scams

March 29, 2009 -- Mourad Zramdini was living the American dream. A good job, fancy car and a brand new home. Walking along a well-manicured street in a brand new development outside of Washington D.C., he points out the condo that used to be his.

Zramdini's dream turned dark after he lost his business and could no longer afford his more than $400,000 mortgage and the steep monthly payments. He needed to refinance, but instead of going to his lender, he went to a company he found on Craigslist, the online classified site.

The company said they could negotiate a lower monthly payment for him but he had to pay up front, $2,500. And they ordered him to stop making his payments. Zramdini trusted the company. He paid the money and stopped paying his mortgage. His debts started to mount, creditors started to call and he started to worry that he'd made a mistake. But when he called the company, all he got were busy signals and long hold times.

"The next thing I know there is a sign on the door and the lock is changed," he says.

Now Zramdini lives in a rental unit, all his credit cards have been revoked and he has creditors calling him every day about the tens of thousands of dollars he owes on a house that he no longer owns. He had been doing everything right, he says, paying all his bills on time for years. Now his financial reputation is ruined.

"My credit is messed up, so messed up now, big time," he says. "It's a nightmare."

It turns out Zramdini might have avoided his run-in with a housing scam if only he had gone to the movies.

In an unprecedented effort to educate homeowners about the danger of mortgage fraud, the Federal Reserve is about to begin airing an awareness campaign in the nation's movie theaters.

Starting April 9, the public service announcements will air in theaters across the country -- mostly in states hardest-hit by foreclosures. The 30-second spots give warning and advice.

"Having trouble keeping up with your mortgage payments?" the ads run. "Are you facing foreclosure? Before you do anything, you need to get information on how to avoid foreclosure scams. Don't get taken advantage of. It shouldn't hurt to get help. Go to FederalReserve.gov and click on 'Five Tips For Avoiding Foreclosure Scams.'"

Ira Rheingold is with the National Association of Consumer Advocates. "When people are scared and desperate they are incredibly vulnerable. And when they're vulnerable that's when all the fraudsters come out."

According to a recent report by the Mortgage Asset Research Institute, the number of suspcious mortgage fraud reports went up 30 percent last year, with the highest rates in New Jersey, Florida and Illinois.

Marietta Rodriguez is with the consumer group Neighborworks America. She says what happened to Mourad Zramdini is typical of how these mortgage schemes work.

"They encourage home owners to stop talking to their lender, cut all communications, that they're now working on their behalf. And stop making payments on their mortgage, which is not sound advice at all."

The Fed hopes the public service announcements can steer troubled homeowners to legitimate government organizations that provide foreclosure-prevention services for free.

But the warning comes too late for Mourad Zramdini. With no house and no credit, he says he is faced with two looming questions: "How can you make people trust you. And who to trust."

Figuring that out is step one. Regaining his financial footing is a far longer road.