Homeowners Beware

Ask several questions before hiring anyone

Two months ago, the Obama administration announced its $75 billion "Making Home Affordable" plan, which seeks to help as many as 9 million people modify or refinance their mortgages. However, Monday, April 6, 2009 government officials admitted that the program has also been a blessing for fraud.
Mortgage scams were out of control during the housing bubble, when credit was available cheaply and often with no questions asked borrowers could get large mortgages. But instead of going away, the problem has developed a new twist. In many cases, mortgage servicers are scamming consumers by charging them upfront fees to participate in the government's program. Minority communities have been a target for fraud and "disproportionately impacted," says Housing and Urban Development Secretary Shaun Donovan.
Treasury, the Department of Justice, the Federal Trade Commission and the Department of Housing and Urban Development will lead the effort to stop fraud. Treasury Secretary Timothy Geithner says the Treasury Department will ramp up its enforcement of mortgage-related financial crimes. "Those who would seek to prey on the most vulnerable also seek to intensify their efforts as well," Geithner said. "We will aggressively pursue those involved in mortgage rescue scams."
The FTC reviewed online and print advertising for mortgage foreclosure companies nationwide and found 71 distinct companies running suspicious ads. The FTC took action by sending warning letters to these 71 companies. The FTC also has filed five civil cases against companies offering loan modification or foreclosure services, including one against a company that spent $9 million on TV and radio ads in less than a year. "These companies are kicking people when they're down, charging enormous upfront fees and sabotaging homeowners who could be getting help for free," said FTC Chairman Jon Leibowitz. "These companies are giving people false hope. They are shameless, as well as opportunistic."
Some of the groups being targeted by the FTC have very legitimate and official-sounding names, such as the Federal Loan Modification Law Center (FedMod) and Hope Now Modifications. These fraudulent organizations have websites like bailout.hud-gov.us and bailout.dohgov.us.
The two websites, registered with a foreign internet service provides, mislead consumers into thinking that they are government websites. According to the FTC, Hope Now Modifications bears a name deceptively similar to the HOPE NOW alliance, a HUD-endorsed group of mortgage market participants. FedMod charges consumers up to $3,000 to modify mortgages, but then rarely changes the loans or responds to customer complaints.
In addition, FBI and state attorneys general also participate in fighting mortgage fraud. The FBI is investigating more than 2,100 mortgage fraud cases, up almost 400% from five years ago, Attorney General Eric Holder said. From July 2002 to June 2008, banks and other depository institutions filed nearly 180,000 "suspicious activity reports" about mortgage fraud, according to Holder.
The moral of the story being: Homeowner Beware! If you are in trouble and need help to fight off foreclosures, you should ask several questions before hiring anyone.
1. How much does the service cost? You should never pay a nickel for foreclosure-prevention counseling. The companies that charge for this service are profit driven, not mission driven, and they can charge up to a couple of thousand dollars for doing an hour's work.
2. How long has the organization performed foreclosure-prevention counseling? Longer is better. Counselors should be fully up to speed on how to handle the particular problems of their clients. Each case may be unique, but experienced counselors can apply what they've learned to other particular cases.
3. Does the counselor have a direct contact with your servicer's mortgage-modification department? Many foreclosure counselors have established working relationships with the mortgage-mitigation specialist of the lender. These are the people authorized to offer workouts to defaulting mortgage borrowers. Of course, almost any firm trying to win your business will say they have a direct contact. So get specific. Ask if they have a written agreement with your servicer or request to speak to your lender’s contact person. The best verification is to call your lender yourself!
4. Does the counselor stay with you every step of the way? Often once a client is assigned a caseworker, that person sticks with the borrower throughout the foreclosure prevention process. That's important. One of the problems that defaulting borrowers have in dealing directly with lenders is they tend to get bounced around from one mortgage mitigation specialist to the next. Working with a single counselor can save time and aggravation.
Of course, even with all those factors in place, there's no guarantee of success. You can avoid fraud, but you might not avoid foreclosure simply because there's nothing anyone can do. If you've lost your job and have no income, even counselors with the best credentials and funds won’t be able to help. Ask yourself if it’s in your best financial interest to hang on to a home. In some cases, borrowers need to stop trying to keep homes they simply can't afford under any legitimate plan.