Consumer Alert: Foreclosure Assistance Scams
Many Minnesota families are struggling with mortgage payments and worrying about the prospect of losing their homes. Unfortunately, scam artists are taking advantage of these fears and preying on anxious homeowners.
Senator Franken wants to make sure that Minnesotans know about mortgage modification and foreclosure assistance scams so they can avoid and report them. It is important to know your rights and where you can turn if you think that someone is trying to take advantage of you.
If you are looking for help with your mortgage, talk to an approved foreclosure counselor.
You have rights as a homeowner.
The Federal Trade Commission and Minnesota State Law prohibit providers of mortgage foreclosure rescue and loan modification services from collecting fees until homeowners have a written offer from their bank, lender, or servicer that they decide is acceptable. This means that you don't have to pay any money until the company delivers results.
It's illegal for a mortgage rescue or loan modification company to charge you until 1) it has given you a written offer for a loan modification or other relief from your lender; and 2) you accept the offer.
The company must also:
- Give you a document from your lender showing the changes to your loan, if you decide to accept your lender's offer.
- Clearly tell you the total fee it will charge you for its services.
It is also illegal for a mortgage rescue company to tell you to stop communicating with your lender or loan servicer.
So if a loan modification service or mortgage rescue company makes a claim and something seems amiss, you should contact the Minnesota Home Ownership Center or the Attorney General's office to make sure the company isn't breaking the law. Keep an eye out for questionable claims about:
- the likelihood of you getting the loan modification you want;
- the company's affiliation with government or private entities;
- your payment and other mortgage obligations;
- the company's refund and cancellation policies;
- whether the company has performed the services it promised;
- whether the company will provide you with legal representation;
- the availability or cost of any alternative to for-profit mortgage assistance relief services;
- the amount of money you will save by using their services; or
- the cost of the services.
A full list of your rights as a homeowner can be found on the Federal Trade Commission's website.
Sign of a Scam:
There are several varieties of scams that are used to rob people, and knowing what to look for can help you avoid them. Remember that if something seems too good to be true, it probably is.
If you're looking for a loan modification or other help to save your home, avoid any business that:
- guarantees to get you a loan modification or stop the foreclosure process — no matter what your circumstances;
- tells you not to contact your lender, lawyer, or housing counselor;
- claims that all or most of its customers get loan modifications or mortgage relief;
- asks for an upfront fee before providing you with any services (unless it's a lawyer you've checked out thoroughly);
- accepts payment only by cashier's check or wire transfer;
- encourages you to lease your home so you can buy it back over time;
- tells you to make your mortgage payments directly to it, rather than your lender;
- tells you to transfer your property deed or title to it;
- offers to buy your house for cash for much lower than the selling price of similar houses in your neighborhood; or
- pressures you to sign papers you haven't had a chance to read thoroughly or that you don't understand.
Newspaper or Online advertisements: Scammers often find their victims through ads on the internet, television, or in newspapers. Be very careful about people advertising with simple but effective messages like "End Foreclosure Now!" or "100% Money Back Guarantee." And be suspicious of mortgage adjusters who contact you out of the blue—they may have found you in public foreclosure records and decided to target you.
Upfront Payments: Many scammers will offer to negotiate with your bank or lender to reduce your payments if you pay them an upfront fee. Sometimes they will tell you to make your mortgage payments directly to them while they negotiate with your lender. They then stop taking your calls and disappear.
Lawyers are the exception to this rule and can require an upfront fee, so before you hire someone claiming to be a lawyer make sure you do your homework. Get the name of each attorney who'll be helping you, the state or states where the attorney is licensed, and the attorney's license number in each state. Then check with the Lawyer Professional Responsibility Board to see if they are licensed or have been disciplined.
Rent-to-Buy: Some scammers will offer to take your mortgage from you, let a borrower with a better credit rating refinance it and then rent it back to you. But you will often end up losing your home as the rent they charge steadily increases or they fail to make the mortgage payments and you end up getting evicted.
The Federal Trade Commission has a very thorough rundown of all these scams and more that you should be on the lookout for.
In this economy it is understandable that people are worried about keeping their homes. However, it is vital that people be on the lookout for scam artists and report them if they are approached. Thieves prey on people's desperation. and you are urged to stay alert. There are approved mortgage counselors who can help and work with you to keep your house.
Additionally, Senator Franken is working to create an Office of the Homeowner Advocate within the Department of Treasury so that homeowners have an additional, trusted resource to turn to when trying to save their homes.