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)

Title company investigated on foreclosures

Cornerstone Title and Escrow, located in the 8100 block of Sandy Spring Road, is being investigated by the Maryland attorney general's office for allegedly using illegal practices to attract customers facing foreclosure.

A complaint was filed Oct. 30 by Attorney General Douglas Gansler in the Baltimore City Circuit Court against Cornerstone, In the House Technologies (a debt relief company in Upper Marlboro) and four individuals.

According to the complaint, the companies and individuals falsely promised homeowners facing foreclosure they would help them keep their homes.

State officials allege that in many cases, the customers ended up losing their property and having their equity stripped by the foreclosure rescue companies.

"They were taking title of the homes, refinancing them and getting the equity out, and then charging the homeowners higher rents than their mortgage payments, so they couldn't save money to keep their homes," said Gansler spokeswoman Raquel Guillory.

Cornerstone Title and Escrow has offices in Laurel, Washington, D.C. and Baltimore. Not associated with the much larger, California-based Cornerstone Title, the Laurel company provides various property title and settlement closing services, according to its Web site.

Sean Adecula, owner of the Laurel office, declined to comment on the allegations. But his attorney, Robert Gittins said, "All Cornerstone did was provide settlement services to clients and has nothing to do with foreclosures. Cornerstone did not provide services to save homes from foreclosure."

Gittins added that he is still reviewing the complaint and has 30 days to respond.

(by Gwendolyn Glenn, LaurelLeader.com)

Foreclosure Fraud

The D.C. Council contemplates a law to prevent it.

WHEN JOY JENISE Jackson and her bridegroom, Kurt Fordham, walked down the aisle together at the Mayflower Hotel last year, they did it in style. The happy couple joined their 360 guests for lobster and four wedding cakes, then bestowed gifts on their attendants that included a house and a Porsche. The newlyweds were also business partners, in the Lanham-based Metropolitan Money Store, a "foreclosure rescue" service that advertised itself as a savior to families in danger of losing their homes.

How romantic. Alas, Metropolitan Money Store was a scam to bilk hundreds of financially troubled homeowners out of the equity in their homes -- allegedly to the tune of $60 million, according to a class-action lawsuit filed in U.S. District Court in Maryland. The company allegedly pitched its services to minorities via radio advertising, then siphoned off their wealth through "straw buyers" who would acquire title to their homes. The Secret Service and FBI are conducting investigations.

Comments that include profanity or personal attacks or other inappropriate comments or material will be removed from the site. Additionally, entries that are unsigned or contain "signatures" by someone other than the actual author will be removed. Finally, we will take steps to block users who violate any of our posting standards, terms of use or privacy policies or any other policies governing this site. Please review the full rules governing commentaries and discussions. You are fully responsible for the content that you post.

Metropolitan Money Store is only the latest alleged version of an old scam that preys on people -- often elderly or minority -- who find themselves in this difficult family crisis. Foreclosure happens fast; as the bank letters begin arriving, people panic. Certainly the risk is not confined to Maryland, which had enacted legislation designed to combat foreclosure-rescue abuses in 2005. The District's attorney general has filed suit on behalf of at least 27 District residents who were allegedly victimized by the Metropolitan Money Store.

The D.C. Council is considering a bill to prohibit foreclosure consultant rip-offs in the District. Shepherded by Mary M. Cheh (D-Ward 3), the legislation, which is likely to pass, would outlaw the kind of promise that the Metropolitan Money Store allegedly made and allegedly broke: Hand over the title to your house in return for a bailout. The bill also declares that anyone who engages in the foreclosure rescue business is legally bound to act in the homeowner's best financial interest. No doubt the next generation of con artists will try to find a way around these strictures. But with the housing market headed for what could be extended difficulty, the District's homeowners need protection against fraud, and this bill is a good start toward giving it to them. (www.washingtonpost.com)

Foreclosure fallout: Rescue scams

Scammers are taking advantage of mortgage holders at their most vulnerable - when they're about to lose their homes.

NEW YORK (CNNMoney.com) -- Jennifer Falke and her family had been in their Columbus, Ohio, home for nearly 12 years when they hit a rough patch in 2006. Falke was out of work and fell behind on the mortgage.

Falke said a flood of mailings and flyers then arrived at her door promising help from foreclosure rescue companies claiming to act as an intermediary between her and her lender to keep her from losing her home.

According to Falke, the company she contacted, Foreclosure Assistance Solutions (FAS), simply took her money and did nothing for her. And by delaying a workout with her lender, it made getting back on track harder and more expensive.

"I called the company, thinking it was the best thing I could do," she said. "They told me they could help. But one of the first things they said was, 'Don't call your mortgage company. If you do they'll tack on fees.'"

For a $1,200 payment, according to Falke, FAS claimed it would handle everything, including calls to the lender, but she charges it did nothing.

"Every time I got enough together to pay off the arrears, they would say the amount had increased." Falke received an income tax refund that she wanted to put toward a payment. But according to her, FAS said her mortgage company said it wasn't enough.

"Then they stopped answering my calls. I would leave a message every day," Falke said. "One day, they told me, 'We're dropping your case' and hung up on me."

Only then did she call her lender. Falke found out the payoff was less than what FAS had told her - $2,600 instead of $3,500. And then she learned that the bank had dealt with many cases like hers.

"To prey on people at one of the most vulnerable points in their lives is despicable," said Ohio Attorney General Mark Dann, who filed suit earlier this month against six foreclosure rescue companies, including FAS, who he claims snared Ohio residents in their webs.

FAS did not return a phone message asking for comment.

As foreclosure rates rise, evidence from other parts of the country indicates the number of rescue scams may be increasing. According to Alison Preszler, a spokeswoman for the Council of Better Business Bureaus, the BBB for Clearwater, Florida, received 508 complaints about local foreclosure rescue companies in the past three years with 322 coming just within the last 12 months.

Charlotte, North Carolina's BBB office reported last year that two foreclosure rescue companies were operating; today the count is 15 and six have already had legal actions taken against them. Twenty-one new companies began operations this year in Cleveland.

According to Dann, the most common form of foreclosure rescue scam in Ohio is like the one Falke claims was used on her. A scammer takes an up-front fee, usually $1,000 or more, to solve the victim's foreclosure problems, and then does little or nothing, pocketing the money.

Dann said victims are often low-income minorities, the elderly or immigrants in poor neighborhoods, but anyone can be targeted.

The most vulnerable members of society often make the easiest marks. A client of Jessica Attie of South Brooklyn Legal Services, was a mentally ill woman with a $60,000 mortgage balance that carried an interest rate of more than 10 percent. She was falling behind on payments, had few other resources and wanted to reduce her payments.

Attie said a scam artist convinced her client to sign over her title while he cleared up the arrears. She could rent the home for six months, and then he would sell it back to her. Instead, according to Attie, the scammer resold the house and absconded with more than $400,000.

Michael Sichenzia knows mortgage rescue scams from the inside out; in 2002, he was convicted and served hard time for mortgage fraud at the Attica Correctional Facility in New York State. Today he's an investigator for the Deerfield Beach, Florida law firm, Glinn Somera & Silva and chief operating officer of Dynamic Consulting Services, specializing in financial fraud.

According to Sichenzia, the most common foreclosure rescue scam has always been "equity stripping."

"The scammer promises to save the home by taking title," he said, "renting it to the owner and selling it back sometime later. Instead, he strips the equity by charging excessive fees, doing phony renovations and not making the mortgage payments."

Sometimes the home owner is fully aware that the title is changing hands, counting on the promise to be able to redeem it later. But other times the scammer tricks the owner.

"The signing over of title is buried in an avalanche of paperwork or in the language of the contracts," said Sichenzia.

Duane Legate, who runs Housebuyernetwork.com, which arranges short sales for homeowners in trouble and also offers foreclosure prevention advice, said, "There's only a handful of legitimate companies out there, ones that really do try to help clients. The rest are just looking for a quick payoff."

According to Legate, the scammers are multiplying so rapidly that there's even a company that sells foreclosure rescue Web sites, complete with testimonials from smiling, satisfied clients.

Here are some of the tactics that scammers are known to use:

* Saturation marketing: They learn of mortgage delinquencies through published reports and proceed to bombard the owners with phone calls, flyers and posters.
* Exploiting trust: Scammers build trust by acting sympathetic and solicitous; many owners can't believe they would lie to their faces.
* Isolating owners: Scammers assure victims that they'll handle everything. They tell them not to call their lenders nor seek legal advice.
* Outright fraud: Scammers have homeowners sign blank papers and fill them in afterward or they sneak the paperwork through without telling victims what they're signing.
* Affinity marketing: Especially among minorities and sometimes evangelical church congregations, a scammer builds trust based on a common ethnicity or religion.

According to Dann, you should never trust anyone who has contacted you, unsolicited, offering to help. "There are no boundaries to entry for any entrepreneurial criminal to get into these scams."

The best thing to do is to call your lender and try to work out a plan. If in doubt, get in touch with your state attorney general's office. It can put you in touch with a Housing and Urban Development-approved free credit counseling service that will do you a lot more good than fee-based rescue services.

Jennifer Falke was able to work out a settlement with her bank. She's back to work and current with her mortgage payments, but she is out the $1,200 she paid to FAS.

"The ingenuity of people who would rather cheat than work hard is unending," said Dann. (http://money.cnn.com)

Mortgage foreclosures are up -- and so are the scams.

Let's say you have received a letter from your mortgage lender advising that if you do not bring your payments current, the lender will have no alternative but to begin foreclosure.

Within days of receiving this notice, you may get a telephone call: "Hi, my name is I.B. Scammer, and I understand that you are delinquent on your mortgage payments. You don't want to lose your beautiful home, and my company can assist you. When can I come over to explain how we operate and how we can help you?"

Hang up immediately. In the trade, these people are often referred to as "bird dogs" -- they'll search for victims and then go after them when they are down.

One large category of mortgage-foreclosure scams is the "rescue" -- when the bad guys prey on the desire of homeowners to be rescued from looming foreclosure. A 2005 report from the National Consumer Law Center highlighted three types of rescues. Even though the report is two years old, its observations are relevant. The types are:

· Phantom help. Here, the "rescuer" will charge the unsuspecting homeowner to do what the owner could have done on his own. For example, the rescuer may make some phone calls or fill out paperwork, but eventually he "abandons the homeowner to a fate that might well have been prevented with better intervention."

· Bailout. The caller tells the consumer that if the homeowner will sign over a deed to the house, the caller will pay off the mortgage and allow the homeowner to stay in the house for at least a year. Then the consumer can repurchase the property, usually for considerably more than the value of the house. "The terms of these deals are almost invariably so onerous that the buyback becomes impossible, the homeowner permanently loses possession, and the 'rescuers' walk off with all or most of the home's equity," the report concluded.

· Bait and switch. The homeowner believes that he or she is merely signing documents for a new loan so that the mortgage can be brought current or paid off. But in reality, the consumer has signed the deed to the house over to the "rescuer."

In 2005, Maryland adopted laws that aim to protect homeowners from these rescue consultants. Similar legislation is under consideration in the District. Recently, Maryland Gov. Martin O'Malley (D) started an initiative that will use $111 million of state funds to help homeowners in financial trouble.

Homeowners who face foreclosure are often desperate for assistance and rely on emotions rather than careful consideration of options. But options are available.

First, talk with your mortgage lender. Most legitimate lenders do not want to foreclose. This is based not on sympathy for the homeowner but on economic reality. If no one buys the house at the foreclosure sale, the lender is stuck with the property and must pay the taxes and insurance until it is sold.

The lender may be able to help in a number of ways. It may defer or reduce monthly payments for a time. It may arrange to refinance your adjustable-rate mortgage so that you will have fixed monthly costs instead of facing escalating payments. It may also allow you to sell your house in what is called a short sale. This means selling for less than you owe, with the lender forgiving some or all of the shortfall.

Second, talk with a consumer counseling service. For example, Maryland homeowners can use several foreclosure counseling services throughout the state. (The full list can be found at http://www.oag.state.md.us/Consumer/foreclose.htm.) Seniors -- especially those with low income -- can contact their local AARP office. The Homeownership Preservation Foundation, a nonprofit sponsored by lenders and others, runs a round-the-clock counseling hotline; call 888-995-HOPE for free advice.

Third, talk with your neighbors. Perhaps they can provide some temporary financial assistance or offer other ideas. After all, if your house is foreclosed on, it may reduce market values in the neighborhood. In the past few months, I've heard of neighbors helping neighbors financially, mostly to protect the values of their own homes.

Fourth, arrange to see a lawyer who specializes in bankruptcy law. Although no one wants to file for bankruptcy protection -- and recent changes in the law make it difficult to do so -- it is an option.

The National Consumer Law Center makes these recommendations on what not to do:

· Don't panic.

· Don't sign a contract under pressure.

· Don't sign any papers without consulting legal counsel.

· Don't rely on the rescuer's translator if you are not conversant in English. All too often, that translator is another bird dog paid by the rescuer to make his case.

· Don't rely on oral statements or promises; get everything in writing.

Consumer protection laws and education are important. But you -- the homeowner -- must protect yourself. Say no to the bird dogs. (washingtonpost.com)