Tips for Avoiding Mortgage Loan Modification Scams
By Ryan Asao, 2012 President
Arcadia Association of REALTORS®
Like all scams, this one promised results that seemed too good to be true.
Just ask one of the 2,000 distressed homeowners who put their faith and what little money they had in a longtime Los Angeles attorney and con-man who promised that suing their mortgage lender was the answer to all their problems.
In partnership with a Nevada-based foreclosure relief company called United First, Inc., attorney Mitchell Roth promised desperate homeowners that legal and other actions could halt foreclosure and even eliminate their debt. For $1,800 in up-front fees and a minimum of $1,250 a month, Roth sued banks on the homeowners’ behalf, alleging that the mortgages had been sold to investors so many times that lenders could not prove who owned the property. Once filed, Roth let the lawsuits languish as long as possible, allowing him time to rack up more fees. In the end, not a single mortgage was modified or foreclosure prevented.
Ironically, scams like this operate right alongside legitimate foreclosure avoidance and mitigation programs that offer assistance at no charge. With far more crooks than prosecutors and billions of dollars in assistance at stake, the problem worsens each time a new foreclosure program is introduced. Mortgage scams are up 60 percent nationally so far in 2012, according to the nonprofit Homeownership Preservation Foundation, as scammers gear up to help themselves to a share of California’s $18 billion settlement with five of the nation’s largest mortgage lenders. Recently, the state Attorney General warned homeowners to be wary of solicitations from third parties promising to help them qualify.
So what can homeowners do to avoid becoming a victim?
” Never pay up-front fees. Foreclosure consultants are prohibited by law from collecting money before services are performed. Instead, call (888) 995-HOPE or visit www.995hope.org/ for a referral to a free HUD-approved housing counselor who can educate you about loan modifications, short sales, and other alternatives to foreclosure.
” Pay attention to letters from your lender or loan servicer. Bank of America, for example, recently sent letters to 200,000 holders of Bank of America/Countrywide mortgages who may be eligible for loan modifications or principal reductions under the terms of the national mortgage settlement. Only your lender or loan servicer is authorized to help you file a claim for assistance. You can visit www.nationalmortgagesettlement.com for more information.
” Don’t transfer title or sell your home to anyone claiming to be able to rescue it from foreclosure by allowing you to stay on as a renter and purchasing it back in the future. Sometimes this scheme is part of a fraudulent bankruptcy filing. Ultimately, the perpetrator may claim ownership and evict the homeowner.
” Don’t make your mortgage payments to anyone other than your lender or loan servicer without the lender’s or servicer’s approval. Scammers generally keep the money for themselves, while your mortgage is likely to end up in default.
” Never sign any documents without first reading them. Many homeowners are falsely led to believe by scammers that they are signing documents for a loan modification or a new loan to pay off their old mortgage. Only later do they realize they have actually transferred ownership to someone who is now trying to evict them.
Finally, if you believe you have been the victim of a foreclosure scam, report it to the California Attorney General’s Office, the Federal Trade Commission, or to the California Department of Real Estate or California Bar Association if your complaint involves a real estate broker or attorney. If the amount you’ve lost is less than $10,000, you can file an action in Small Claims Court.
Mortgage foreclosure fraud can be prevented with awareness, education, and enforcement – and an occasional reminder that if the solution to your problem sounds too good to be true, it probably is.
Representing local Realtors® in the San Gabriel Valley for 88 years, the ARCADIA ASSOCIATION OF
REALTORS® (www.TheAAR.com) is one of the oldest trade organizations in CA. The AAR is
dedicated to the advancement of professionalism in real estate and is an advocate for private property
rights. A.A.R. is headquartered in Arcadia.