Beware of foreclosure scammers

You get what you pay for, right? Well ... If you live by that rule of thumb and you're trying to avoid foreclosure, you'll seek out a for-profit foreclosure consultant who will charge you for any services provided. But consumer-protection advocates say you're much better off going to a nonprofit housing counseling agency that will work with you for free.

Reason No. 1 is pretty obvious.

"They're charging a lot of money for something the homeowners don't need to be paying those kinds of sums for," Robert Strupp, director of research and policy with the Community Law Center, says of foreclosure consultants.

It's thousands of dollars in some cases, he says. Any money you don't shell out for foreclosure help is money you could use to pay late fees and other lender penalties.

Ruth L. Griffin of the Maryland Housing Counselors Network says the only thing a nonprofit approved by the U.S. Department of Housing and Urban Development might ask a struggling borrower to pay is an incidental cost such as the expense of ordering a credit report. There's a list of those groups at www.hud.gov/foreclosure.

Strupp and the Maryland Attorney General's Office say you're also putting yourself at risk of being scammed if you go anywhere but a HUD-approved nonprofit.

"We have several suits currently pending against people who were purporting to offer foreclosure rescue and in fact took the houses," says Bill Gruhn, chief of the attorney general's consumer protection division.

In Gruhn's opinion, this is not a shop-around situation. When I asked if a borrower who does some due diligence first should sign on with a for-profit consultant, his answer was succinct: "No."

As nonprofit counselors get overloaded with people seeking help, Strupp worries that homeowners will turn to for-profit consultants by default. But attorneys are starting to volunteer their time, and more nonprofit counselors are on the job than before.

"We weren't really doing this last year ... but there was so much volume that we really felt like we needed to help," says Felix Torres Colon, executive director of Neighborhood Housing Services of Baltimore, a nonprofit lender that now does foreclosure counseling too. The group sees about 240 homeowners a month, he says.

"Helping people with foreclosure is very difficult; some people have really impossible situations," Torres Colon says. "So if anyone tells you it's going to be really easy and quick and all you have to do is pay a few bucks, run away." (By Jamie Smith, Baltimore Sun)

To help the homeowners

The Maryland State Bar Association had published the brochure that covers the basics of foreclosure proceeding in Maryland. It is accessible from Bar's website: http://tinyurl.com/68pydd