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The ongoing recession, coupled with rising unemployment, has put enormous pressure on American homeowners. Many have watched their equity dissipate for two years, often owing more on the mortgage than the property is worth. Many cannot obtain financing under the stricter credit guidelines. Many are unemployed, looking for work in a bleak job market and struggling to pay bills. Many are self-employed and can no longer access financing in the absence of ‘stated’ programs. May, 2009 posted the fourth highest foreclosure rate on record.
Unfortunately there are numerous unscrupulous individuals eager to take advantage of consumers in vulnerable or desperate circumstances. The mortgage meltdown spawned a cottage industry of ‘foreclosure rescue’ companies and ‘loan modification’ specialists. Government officials and consumer advocacy groups warn that a significant number of these companies specialize in nothing more than separating you from your money or your house.
Obama signed legislation on May 20th giving the FBI, Justice Department, Secret Service and U.S. Postal Service a half a billion dollars to investigate and prosecute individuals and companies suspected of mortgage fraud. The targets range from people who lie on home mortgage applications to foreclosure and loan modification scammers who bilk money out of homeowners seeking mortgage modifications.
On June 17th, 2009 Eric Holder made a statement before the U.S. Senate Committee on the Judiciary regarding mortgage fraud, saying “As many Americans face the adverse effects of a devastating economy and an unstable housing market, the Administration announced a new coordinated effort across federal and state government and the private sector to target mortgage loan modification fraud and foreclosure rescue scams. These fraudulent activities threaten to hurt American homeowners and prevent them from getting the help they need during these challenging times. The new effort aligns responses from federal law enforcement agencies, state investigators and prosecutors, civil enforcement authorities, and the private sector to protect homeowners seeking assistance under the Administration’s Making Home Affordable Program from criminals looking to perpetrate predatory schemes.
The Department, in partnership with the U.S. Department of Treasury, the Department of Housing and Urban Development (HUD), the Federal Trade Commission (FTC) and the Attorney General of Illinois, will coordinate information and resources across agencies to maximize targeting and efficiency in fraud investigations, alert financial institutions to emerging schemes, and step up enforcement actions. As part of this multi-agency effort, the Department has outlined ways to crack down on mortgage fraud schemes. The FBI is investigating more than 2,500 mortgage fraud cases as of May 31, 2009. This number is up almost 400 percent from five years ago. The Bureau has more than doubled the number of agents investigating mortgage scams, created a National Mortgage Fraud Team at Headquarters, and is working hand-in-hand with other partnering agencies.”
Fraudulent schemes evolve over time. There are endless variations of the familiar scams as well as new scams emerging in response to market changes. With the incidence of fraud increasing, consumers need to be increasingly vigilent.
Be careful what you sign
There are numerous scams involving deed transfer or questionable loan paperwork. The strategy varies, but the goal is always the same; separate you from your money and, possibly, your property.
Never sign over your deed. Scenario: transferring the deed is presented as a necessity to negotiate on your behalf. Whereas it is true that the lender will only negotiate with the owner, you can authorize an attorney or qualified third party individual to represent your interests. There is no need to alter your deed.
The deed transfer may be buried in bogus refinance paperwork. If you are behind on your mortgage, teetering on the edge of foreclosure and/or your credit scores are very low, be careful about calls regarding miraculous mortgage refinancing options. Scenario: you get a call from someone offering to refinance your property. When you ‘close’ on the loan, a deed is buried in the stack of loan paperwork that you sign. It’s common for people to race through the pages without reading a thing. I can sympathize. It is 100+ pages of endless disclosures and gibberish. This trait can be exploited. Carefully review all loan documents before signing them with a keen eye for any document with the word “deed.” I would suggest having an attorney review any documents that seem questionable.
Another common scam is to ask the homeowner to sign documents with blank lines or spaces. Once your signature is on the document, the terms of the agreement can be altered or new terms can be added. Make a copy of all financial documents pertaining to your home and never sign a blank document.
Another ploy involves convincing the homeowner to stay in the property as a tenant. Scenario: a company/individual offers to ‘assume’ the mortgage. They promise to let you buy the property back at a later date if you agree to pay rent and sign over the deed. It is presented as a viable option to foreclosure. The homeowner is led to believe that the company/individual will pay the existing mortgage or refinance it into their name. Instead, they take the rent money and vanish. The home goes into foreclosure and the homeowner is obligated to pay the debt.
Be wary of direct solicitation
When you receive unsolicited email, phone or mail regarding mortgage assistance, it may be an identity theft scam. It is a ploy to obtain your Social Security number, credit-card numbers and other confidential information in order to run a credit report. Once the information is obtained, your identity can be used for various forms of financial fraud.
Get professional advice when considering options
Unless your agent is a licensed attorney, it is illegal in most states for an agent to negotiate a loan modification with your lender. Negotiating the terms of a mortgage workout may be viewed as practicing law. The agent could lose his or her real estate license if deemed to be practicing law without a license.
When evaluating alternatives, a 'loan audit' is performed. This can be done via software or by a human. A “loan audit” examines homeowners' appraisal, mortgage and supporting documents, in the context of the dealings surrounding the creation of those documents. The advantage to having an experienced attorney vs. any human with access to software is that an attorney, with a background in real estate law, can discover legal defenses a homeowner can use to avoid foreclosure or find ways to use the law offensively to obtain favorable refinancing on the borrower's terms, rescind the mortgage and get all of the money refunded, prove punitive damages or, in some cases, get the property declared free and clear.
Many loan modification companies, and some attorneys, are charging consumers for seminars and promised future services. Read the FTC guidelines to avoid commons scams involving up-front fees. Check the FTC's Scam Watch for information about different scams and how to report potential problems
Go to MakingHomeAffordable.gov to see if you are eligible for any of the government’s new refinancing and loan-modification programs. HopeNow.com (888-995-HOPE), preservehomeownership.org and Housing Options and Planning Enterprises can provide you with counseling in terms of your specific situation. There is no fee.
Loan counseling is available free of charge from HUD. Find a HUD-approved housing counselor near you or call (800) 569-4287 or TTY (800) 877-8339. See my article Foreclosure | Tips and resources for more information on loan modification and foreclosure resources. Click here for part two.
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Comments
I just feel that the foreclosures across the nation are getting out of hand. My neighborhood has had several foreclosures in the past year and there lawns are now dead with weeds growing everywhere there is dirt. This does not just effect the person who lost there home but also the people in the neighborhood who are stuck next to there home.
I was under the impression that Obama's plan was suppose to help these people keep their homes. I almost feel that the bail out on the banks has made them stingier. I feel like you can not even get a loan modification on your own now. I found the best way was to find somewhere with an on staff attorney to fight the bank for you. My friend recently used Carrotpeel.com and said they did a great job for him in lowering his monthly payments.
To stop housing scams, we must continue investigating U.S. Attorneys firing scandal.
I've put together a Homeowner's Guide that encompasses all the guidelines for the Making Home Affordable Plan. Anyone who is interested, can get this free at www.MortgageCreditTrauma.com
Catch up with the times. Read "Busted." Many self employed or first time buyers never could qualify for fixed financing. So came the push for the zero down or Option -Arm loans. All explained we could afford then refinance in a few years. Waves to come 3years, five year and even ten year option are out there. Brokers lying left and right then saying your own fault you signed. Now over the edge, no room to explain everything, modifications can't work. No equity, upside down over $100,000. No income. Lenders claim your not contacting us. That's B.S. How do you sit down a poker table with two cents and a IOU. Yes many of other scams are out there. FBI doing a great job going after the fly by night co. Again, the biggest problem is the initial Option-Arm contract buying the home where you trusted signed and got taken in by your broker. No way out they say you signed. In this mess it's a little to late to teach and warn to be careful what you sign. No one can afford to buy anyway.
Loan audits is all we have to sue these lenders for fraud. And they are not responding to the audits. We have U.S. Codes Title 18 Chap. 47 Sec 1006,1010,1011,1014 Explaining fraud and false statements. Laws meant to prosecute them.
Title 12 Chap. 29 Sec. 2803 (6) Retention of records. Loan application must be on file 4 years after closing. Please! Show me where I lied. Please!
Title 12 Chap. 27 'Special Booklet" Sec. 2604
Must hand out. Did you ever recieve or even read one?
Haven't found show me the note law but I'm looking. Tired of watching people become homeless for trusting. Tired of reading the articles blaming the homeowner.
Look up U.S. Codes
Entering the doctors office and he says you need surgery. Is it your job to cross reference medical journals about your illness? Did you lie about your symptoms? How can we help you. You signed the note!
Taylor, John, Steve: Thank you for your comments. I will check out that homeowner's guide Taylor. John, the foreclosures are out of hand. They soared after the market collapse, but the increase in unemployment and tighter credit guidelines have made the situation worse. The push to purchase Treasuries and securities lowered the interest rates, which did help stimulate the market, but the credit guidelines are very tight, jumbo mortgage rates are not competitive and the recent increases have cooled refinancing activity. I am glad your friend was able to get his payment reduced. Steve, good information on the legal codes. I, too, am tired of watching people be exploited.
Leslie, instead of jumping in on the pile on that is bashing the scam artists in this industry, how about doing an article on a comapany or two that does good ethical work?
This whole stimulus package is just part of the governments long term plan to take away the power of the people. Are we going to do something about it or be lazy and think someone else is going to do it for us? It is time for a revolution. We need to overthrow the government and take our power back. Before there is nothing we can do about it. you should check www.obamamortgage2009.blogspot.com/2009/03/obamas-ortgage-modification-do-you.html#comments
It is estimated that Obama's plan could benefit 8 to 9 million homeowners from the new modification procedures. So how do you know you qualify for the Mortgage Modification? Check the website www.obamamortgage2009.blogspot.com
to see if you qualify. I was also in trouble and I am glad I did check it before I talk to my mortgage company and it helped - howardamin, California
Check out www.obamamortgage2009.blogspot.com or obamamortgage2009.blogspot.com There needs to be a program for the elderly but not quite to retirement age for mortgage modification when the have lost their job during this particular recession. I made a decent wage because I put my time into a company and now have no job. I am looking at $10 - to $12 hr jobs after working all my life. You can't make a mortgage payment on that kind of money. I will eventually lose my home.
If anyone has had any luck with any of these companies, could you please post it for the ones that cannot find one to work with you. We've almost lost once and just got a second chance that want last long so I need to get something done now, so if anyone knows the right number to call, i am sure a lot of people that hasn't found them would appreciate it but check out www.obamamortgage2009.blogspot.com or obamamortgage2009.blogspot.com
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