Banks repossessed more than one million homes in 2010 according to Realty Trac, Inc. while nearly five million borrowers are currently sixty days or more behind on their mortgage setting up what is to be a bleak 2011. The housing market in the United States may not be thriving, but business is booming for foreclosure rescue and loan modification scammers.
The U.S. Government Accountability Office (GAO) says that there are two main types of foreclosure rescue scams designed to profit from homeowners desperate to save their homes: advance-fee loan modification schemes and sales-leaseback schemes - with advance-fee schemes being the most prevalent. Under Michigan's Credit Services Protection Act, it is illegal for most companies and individuals to charge or receive a fee before completing any services.
In an advance-fee scheme, an unqualified business charges you a fee in advance to negotiate a deal with your mortgage lender. They may even offer a money-back guarantee. But the usual outcome is that they take your money (the average is about $3,000), provide little or no service, and then refuse to refund the fee. In a sales-leaseback scheme, the scammer persuades you to transfer your deed to them by offering to assume your payments and let you pay rent while you get your affairs in order. They promise to sell the property back to you once your financial situation improves, but, of course, they don't. Often they take out another loan on the home or even sell it out from under you.
The Federal Trade Commission reports on a new twist on the advance-fee scam that's showing up this year, a "forensic mortgage loan audit." The scammer offers to find regulatory violations in your original mortgage that will help you avoid foreclosure or even cancel your loan. There's no evidence that anyone has ever succeeded in modifying their loan using this approach.
Here are some "red flags" that at-risk homeowners should watch out for when looking for foreclosure help:
* Businesses that guarantee to stop the foreclosure process - no matter what your circumstances.
* You are instructed not to contact your lender, lawyer, or credit or housing counselor.
* Businesses that collect a fee before providing you with any services. For exceptions consult the Michigan Credit Services Protection Act.
* Businesses that only accept payment by cashier's check or wire transfer.
* You are encouraged to lease your home so you can buy it back over time.
* You are told to make your mortgage payments directly to the business, rather than your lender.
* You are told to transfer your property deed or title to the business.
* The business offers to buy your house for cash at a fixed price that is not set by the housing market at the time of sale.
* The business offers to fill out paperwork for you.
* You are pressured to sign paperwork you haven't had a chance to read thoroughly or that you don't understand.
The BBB recommends that before obtaining help from a for-profit business looking to gain from your hardship, research credible non-profit organizations that provide needed services to help prevent mortgage foreclosure. "Foreclosure does not discriminate" says Jamele Hage of the Southeast Michigan Regional Foreclosure Intervention and Neighborhood Stabilization Collaborative (FINSC). "People needing help can simply dial 211 to get free foreclosure prevention information anytime."
The following are just a few sites of organizations that provide foreclosure prevention information:
www.fightmortgageforeclosurefinsc.com
www.foreclosuredetroit.org
www.greenpath.com
Published: Thu, Feb 3, 2011
