12,340 customers in state are eligible for restitution of several hundred dollars
Marylanders who got home loans from Ameriquest Mortgage Co. can begin to claim their share of a $325 million settlement reached with the subprime lender that was accused of preying upon borrowers nationwide with deceptive practices.
Douglas F. Gansler, Maryland's attorney general, announced yesterday that his agency and the Maryland commissioner of financial regulation sent letters and claim forms this week to 12,340 Ameriquest customers in Maryland who are eligible for $7.8 million in restitution.
Depending on how they were harmed, borrowers could receive hundreds, and in some cases thousands, of dollars.
Ameriquest, a subsidiary of ACC Capital Holdings in Orange, Calif., agreed in January 2006 to settle the case brought by 49 states, including Maryland, after a two-year investigation. Under the agreement, the company has been paying into a settlement fund in installments.
"It's a very, very large amount of money, so we allowed them to pay quarterly, rather than come up with the entire amount all at once," said V. Scott Bailey, a Maryland assistant attorney general. "That would have put them out of business, and in that case it would have been questionable how much we could have collected for consumers."
Regulators said the lender, which consented to changing its lending practices but didn't admit any wrongdoing, misrepresented the terms of home loans, such as whether it carried a fixed or an adjustable rate.
The lender and its affiliates also charged excessive loan origination fees and prepayment penalties; refinanced borrowers into inappropriate loans, and inflated appraisals used to qualify borrowers for loans, regulators said. Ameriquest has been retrenching along with the subprime industry, which has been roiled by losses from rising foreclosures. Subprime loans are made to borrowers with bad credit histories or heavy debt.
The mortgages often charge higher interest rates to compensate for the greater risk of default.
Dozens of subprime mortgage companies have declared bankruptcy, shuttered operations or been sold in recent months. Ameriquest, which was one of the largest, closed more than 200 branch offices last year and consolidated operations into four call centers.This year the company moved those operations into one call center in Orange, spokesman Chris Orlando said.
The National Association for the Advancement of Colored People sued Ameriquest and other lenders this week. The civil rights group alleges that the lenders discriminated against black borrowers by steering them into higher-interest subprime loans while giving more favorable loan terms to whites.
As for the multistate settlement, Orlando called the restitution "an important final step." The settlement covers customers of Ameriquest, Town and Country Credit Corp., and AMC Mortgage Services, formerly known as Bedford Home Loans, from January 1999 through December 2005.
Consumers owed restitution will be paid out under two tiers depending on how they were allegedly deceived. One will pay out an average of $756; the other an average of $569.
The forms mailed to eligible borrowers indicate a minimum payment they can expect to receive, though that figure could grow if fewer borrowers decide to take part in the settlement.
Consumers who do opt for the settlement give up their right to sue Ameriquest over the loans that are covered; they would not be giving up any claim they could otherwise raise if their homes go into foreclosure.
Gansler's office encouraged consumers to consult a private attorney or seek subsidized legal services. They must mail competed and signed forms to the settlement administrator by Sept. 10. (baltimoresun.com)
Tuesday, July 17, 2007
Monday, July 16, 2007
For sale by lender
Foreclosed properties make up 10%-15% of local property listings
Thanks to a sharp rise in foreclosures, homebuyers are increasingly likely to encounter bank-owned properties in the housing market - listed for sale, offered at auction or even touted as a "good deal" on lenders' Web sites. But getting a bargain on a foreclosed home is hardly a sure bet.
Amid a housing slump that has pushed home listings to record numbers, lenders, too, are competing to sell homes, often through the multiple-listing service. Borrowers, in many cases, have been hurt in the slowdown by a loss of equity that could have helped them avoid foreclosure.
The increase in bank-owned properties comes as more homeowners, many in the suburbs, find themselves unable to keep up with payments on loans made during the housing boom, a time when low mortgage rates, relaxed lending standards and fast-rising home prices fueled a frenzied market.
Though it's difficult to track how many foreclosed properties are listed for sale, agents who sell homes for lenders estimate they represent 10 percent to 15 percent of active listings in the Baltimore area.
In June, nearly 20,000 homes were on the market in Baltimore and the five surrounding counties, according to statistics from Metropolitan Regional Information Systems Inc.
The number of lender-owned properties is expected to grow as billions of dollars in mortgages reset in coming months, triggering higher payments for homeowners.
Loans in the foreclosure process in Maryland soared nearly 30 percent in the first quarter compared with the first three months of 2006, and the number of borrowers at least 60 days behind on payments rose 20 percent, according to the most recent report by the Mortgage Bankers Association.
While Maryland is faring better than the nation as a whole, that still means about 5,700 Maryland homeowners were in danger of losing their homes in the first quarter.
Rising foreclosures could squeeze home values even more and prolong the slump, economists say.
"Eventually, foreclosures will be returned to the marketplace," said Celia Chen, director of housing economics for Moody's Economy.com. "Lenders have to take them back and sell them and try to sell them as fast as they can. ... It will keep price appreciation weak."
Local home listings, already at a record high, will climb even more, partly because of mounting foreclosures, said economist Anirban Basu, chief executive officer of Sage Policy Group Inc. of Baltimore.
"Inventory has been rising sharply, and it will continue to rise, with the impact of ARMs [adjustable-rate mortgages] resetting and foreclosure activity," Basu said. "I don't think we've begun to see that impact in a major way."
Real estate agents and brokers, too, worry that putting more inventory into an already sluggish market will bring down prices and cause houses to sit longer.
Jennifer Marshall, an agent with Maryland REO real estate brokerage, said she is seeing the number of foreclosure properties soaring in suburban areas.
"With more inventory, it's a buyer's market now," Marshall said. "People aren't going to offer what the house is listed for. ... It's more challenging for agents, and you have to think about different ways to get your properties out there and get them sold."
Banks are increasingly buying foreclosed properties back at auction as other bids fall short of the amount owed. That scenario has become more common as the number of owners with little or no equity - or even negative equity - has grown, particularly in cases of pricier homes with more recent mortgages.
"Because we're seeing more expensive homes, higher-end homes going to foreclosure, logic indicates that less of those are being sold to third parties," or buyers other than the lender," said Donald Miller, national sales director for Express Auctions, of Baltimore. Miller said about 30 percent of the homes sold through his company's foreclosure auctions go back to the lenders, but banks tend to buy back an even greater percentage at foreclosure auctions in general.
"As a general rule, the newer loans have less equity, so there's going to be a higher percentage of buy-ins" by the bank, said Daniel M. Billig, a partner in A.J. Billig and Co., the Baltimore auction house.
Lenders' bigger stakes mean they aren't likely to discount properties they buy back and subsequently list, agents said. And lenders can invest thousands more to repair properties.
As a result, like other sellers, they're looking to get top dollar, said David McIlvaine, an associate broker with Keller Williams in Ellicott City who sells foreclosure properties for lenders.
McIlvaine said when he began listing homes for lenders eight years ago, most of the homes were lower-end properties, typically city rowhouses.
"That's not the case anymore," McIlvaine said. "We're seeing a more representative group of inventory crossing all lines."
That's because borrowers who stretched to qualify for more flexible loans - including adjustable rates, no down payments and interest-only payments - have been added to the categories of borrowers who had lost their homes to foreclosure due to job loss, illness or divorce, experts said.
"You're seeing nicer homes, higher-priced homes," agreed Jeff Rogers, an associate broker with Coldwell Banker who lists homes for lenders, who said some of the borrowers have owned their homes for two years or less. "You sort of saw that coming. [Borrowers] were being set up for failure with some of these mortgages."
Miller, at Express Auctions, one of a handful of auction houses that handles the majority of foreclosure auction sales in the state, said investors continue to buy most auctioned properties that aren't bought back by lenders.
But individual homebuyers are starting to get into the mix, as investor Ed Kowalski has noticed.
"On a few occasions I have been outbid by owner-occupants," said Kowalski, who buys, renovates and resells homes in Baltimore and Baltimore County. "Generally, they'll pay more than I'll pay as an investment."
One homebuyer who came to an Express Auction in May beat out an investor on a three-year-old house in Hampstead, with a winning bid of $567,500. Before the auction, the owners had listed it for sale at $1 million, Miller said.
The buyer of the property got a sprawling five-bedroom house with a master bedroom, sitting room with coffee bar, workout room, library and a three-car garage, in a neighborhood where houses have sold for more than $700,000.
Buying at foreclosure auction is not without hurdles.
Successful bidders often must pay a cash deposit, typically 10 percent of the outstanding loan amount. The new owner must pay off any liens or second mortgages. And properties are sold as is. And an owner or tenant living in the house may or may not be cooperative about moving out.
Sihin Shiferaw, an investor who buys and rehabs homes in Baltimore City and Howard County, mostly at auction, recently took a chance on a bank-owned home listed for sale. After signing a sales contract, she discovered water in the home's basement and backed out of the deal, losing a $2,000 deposit.
Evelyn Ray, a real estate agent with Long and Foster in Bel Air, is hoping the increase in foreclosures might help some of her clients who are struggling to buy a house in the aftermath of a soaring market. Ray said she has begun looking for foreclosure properties to show her clients.
"Now, people just cannot afford the houses that are out there," said Ray. "I have about 30 buyers who are just waiting. They either can't afford the houses they want or are just scared or waiting for prices to come down, or they can't sell."
Cathy Holmes, a single mother of three who works as a biological lab technician at Aberdeen Proving Ground, hopes to find a deal on a foreclosed home as a last resort to finally be able to move from a rental apartment in Whiteford. Ray, her agent, has taken her to see several homes. But so far she hasn't been able to come up with the deposit that would qualify her to bid.
"I've been renting the same apartment for 11 years, it's just impossible to get out," said Holmes, who is looking for a single-family house with some land. "I just want to have a house where I don't have to hear the neighbors' telephones ringing and their conversations. I look and I look and I look. I just can't find anything that I can afford." (baltimoresun.com)
Thanks to a sharp rise in foreclosures, homebuyers are increasingly likely to encounter bank-owned properties in the housing market - listed for sale, offered at auction or even touted as a "good deal" on lenders' Web sites. But getting a bargain on a foreclosed home is hardly a sure bet.
Amid a housing slump that has pushed home listings to record numbers, lenders, too, are competing to sell homes, often through the multiple-listing service. Borrowers, in many cases, have been hurt in the slowdown by a loss of equity that could have helped them avoid foreclosure.
The increase in bank-owned properties comes as more homeowners, many in the suburbs, find themselves unable to keep up with payments on loans made during the housing boom, a time when low mortgage rates, relaxed lending standards and fast-rising home prices fueled a frenzied market.
Though it's difficult to track how many foreclosed properties are listed for sale, agents who sell homes for lenders estimate they represent 10 percent to 15 percent of active listings in the Baltimore area.
In June, nearly 20,000 homes were on the market in Baltimore and the five surrounding counties, according to statistics from Metropolitan Regional Information Systems Inc.
The number of lender-owned properties is expected to grow as billions of dollars in mortgages reset in coming months, triggering higher payments for homeowners.
Loans in the foreclosure process in Maryland soared nearly 30 percent in the first quarter compared with the first three months of 2006, and the number of borrowers at least 60 days behind on payments rose 20 percent, according to the most recent report by the Mortgage Bankers Association.
While Maryland is faring better than the nation as a whole, that still means about 5,700 Maryland homeowners were in danger of losing their homes in the first quarter.
Rising foreclosures could squeeze home values even more and prolong the slump, economists say.
"Eventually, foreclosures will be returned to the marketplace," said Celia Chen, director of housing economics for Moody's Economy.com. "Lenders have to take them back and sell them and try to sell them as fast as they can. ... It will keep price appreciation weak."
Local home listings, already at a record high, will climb even more, partly because of mounting foreclosures, said economist Anirban Basu, chief executive officer of Sage Policy Group Inc. of Baltimore.
"Inventory has been rising sharply, and it will continue to rise, with the impact of ARMs [adjustable-rate mortgages] resetting and foreclosure activity," Basu said. "I don't think we've begun to see that impact in a major way."
Real estate agents and brokers, too, worry that putting more inventory into an already sluggish market will bring down prices and cause houses to sit longer.
Jennifer Marshall, an agent with Maryland REO real estate brokerage, said she is seeing the number of foreclosure properties soaring in suburban areas.
"With more inventory, it's a buyer's market now," Marshall said. "People aren't going to offer what the house is listed for. ... It's more challenging for agents, and you have to think about different ways to get your properties out there and get them sold."
Banks are increasingly buying foreclosed properties back at auction as other bids fall short of the amount owed. That scenario has become more common as the number of owners with little or no equity - or even negative equity - has grown, particularly in cases of pricier homes with more recent mortgages.
"Because we're seeing more expensive homes, higher-end homes going to foreclosure, logic indicates that less of those are being sold to third parties," or buyers other than the lender," said Donald Miller, national sales director for Express Auctions, of Baltimore. Miller said about 30 percent of the homes sold through his company's foreclosure auctions go back to the lenders, but banks tend to buy back an even greater percentage at foreclosure auctions in general.
"As a general rule, the newer loans have less equity, so there's going to be a higher percentage of buy-ins" by the bank, said Daniel M. Billig, a partner in A.J. Billig and Co., the Baltimore auction house.
Lenders' bigger stakes mean they aren't likely to discount properties they buy back and subsequently list, agents said. And lenders can invest thousands more to repair properties.
As a result, like other sellers, they're looking to get top dollar, said David McIlvaine, an associate broker with Keller Williams in Ellicott City who sells foreclosure properties for lenders.
McIlvaine said when he began listing homes for lenders eight years ago, most of the homes were lower-end properties, typically city rowhouses.
"That's not the case anymore," McIlvaine said. "We're seeing a more representative group of inventory crossing all lines."
That's because borrowers who stretched to qualify for more flexible loans - including adjustable rates, no down payments and interest-only payments - have been added to the categories of borrowers who had lost their homes to foreclosure due to job loss, illness or divorce, experts said.
"You're seeing nicer homes, higher-priced homes," agreed Jeff Rogers, an associate broker with Coldwell Banker who lists homes for lenders, who said some of the borrowers have owned their homes for two years or less. "You sort of saw that coming. [Borrowers] were being set up for failure with some of these mortgages."
Miller, at Express Auctions, one of a handful of auction houses that handles the majority of foreclosure auction sales in the state, said investors continue to buy most auctioned properties that aren't bought back by lenders.
But individual homebuyers are starting to get into the mix, as investor Ed Kowalski has noticed.
"On a few occasions I have been outbid by owner-occupants," said Kowalski, who buys, renovates and resells homes in Baltimore and Baltimore County. "Generally, they'll pay more than I'll pay as an investment."
One homebuyer who came to an Express Auction in May beat out an investor on a three-year-old house in Hampstead, with a winning bid of $567,500. Before the auction, the owners had listed it for sale at $1 million, Miller said.
The buyer of the property got a sprawling five-bedroom house with a master bedroom, sitting room with coffee bar, workout room, library and a three-car garage, in a neighborhood where houses have sold for more than $700,000.
Buying at foreclosure auction is not without hurdles.
Successful bidders often must pay a cash deposit, typically 10 percent of the outstanding loan amount. The new owner must pay off any liens or second mortgages. And properties are sold as is. And an owner or tenant living in the house may or may not be cooperative about moving out.
Sihin Shiferaw, an investor who buys and rehabs homes in Baltimore City and Howard County, mostly at auction, recently took a chance on a bank-owned home listed for sale. After signing a sales contract, she discovered water in the home's basement and backed out of the deal, losing a $2,000 deposit.
Evelyn Ray, a real estate agent with Long and Foster in Bel Air, is hoping the increase in foreclosures might help some of her clients who are struggling to buy a house in the aftermath of a soaring market. Ray said she has begun looking for foreclosure properties to show her clients.
"Now, people just cannot afford the houses that are out there," said Ray. "I have about 30 buyers who are just waiting. They either can't afford the houses they want or are just scared or waiting for prices to come down, or they can't sell."
Cathy Holmes, a single mother of three who works as a biological lab technician at Aberdeen Proving Ground, hopes to find a deal on a foreclosed home as a last resort to finally be able to move from a rental apartment in Whiteford. Ray, her agent, has taken her to see several homes. But so far she hasn't been able to come up with the deposit that would qualify her to bid.
"I've been renting the same apartment for 11 years, it's just impossible to get out," said Holmes, who is looking for a single-family house with some land. "I just want to have a house where I don't have to hear the neighbors' telephones ringing and their conversations. I look and I look and I look. I just can't find anything that I can afford." (baltimoresun.com)
Tuesday, July 10, 2007
Code red heat alert issued for city
With temperatures expected to hit the mid-90s and a heat index approaching 100 degrees, the city Health Department has issued a Code Red Heat Alert that will continue through Wednesday.
Five cooling centers operated by the Housing Authority of Baltimore City will open around the city today at 9 a.m. and each will have cool air, water and ice. Three more centers will be opened by the Commission on Aging and Retirement Education and residents also are encouraged to visit city park and recreation centers if they need a respite from the heat.
According to the National Weather Service, high temperatures for today and Tuesday will be in the mid-90s, and lows will be in the mid-70s. A cold front should be moving in mid-week, dropping temperatures down to the mid-80s. However, showers and thunderstorm will develop ahead of that front, bringing first humidity, then showers and scattered thunderstorms Tuesday night and into Wednesday and Thursday.
"With the highs climbing up into the mid-90s and the moisture in air, the combination of heat and humidity will cause heat index values of near 100," today and Tuesday, said Calvin Meadows of the National Weather Service.
That weather can be dangerous for some populations and Meadows said that people should avoid intense activity, wear light-colored clothing and drink plenty of water. Pets should not be left in hot cars, and also should be given plenty of water.
In addition, the Baltimore City Health Department recommends that city residents avoid alcohol and caffeine, wipe skin with cool water as needed, stay inside during the hottest time of day and check on older, sick, or frail people in the community who may need help.
People also should watch out for signs of heat exhaustion and heat stroke, which include confusion, nausea, light-headedness and high body temperature with cool and clammy skin. Anyone experiencing those symptoms should seek help immediately.
City cooling centers are:
Northern Community Action Center, 5225 York Road
Northwest District Community Action Center, 3314 Ayrdale Ave.
Southeast Community Action Center, 3411 Bank St.
Southern Community Action Center, 606 Cherry Hill Road (inside the shopping center, second floor)
Western District Community Action Center, 1133 Pennsylvania Ave.
Oliver Center, 1700 Gay St.
Sandtown-Winchester Center, 1601 Baker St.
Hatton Center, 2825 Fait Avenue.
The Baltimore County Department of Health also opened its three cooling centers today. The centers are open from 10 a.m. to 8 p.m. today and Tuesday. They are:
Essex Senior Center, 600 Dorsey Road, 410-887-0267
Lansdowne Senior Center, 424 Third Ave., 410-887-1443
Parkville Senior Center, 8601 Harford Road, 410-887-5338 (baltimoresun.com)
Five cooling centers operated by the Housing Authority of Baltimore City will open around the city today at 9 a.m. and each will have cool air, water and ice. Three more centers will be opened by the Commission on Aging and Retirement Education and residents also are encouraged to visit city park and recreation centers if they need a respite from the heat.
According to the National Weather Service, high temperatures for today and Tuesday will be in the mid-90s, and lows will be in the mid-70s. A cold front should be moving in mid-week, dropping temperatures down to the mid-80s. However, showers and thunderstorm will develop ahead of that front, bringing first humidity, then showers and scattered thunderstorms Tuesday night and into Wednesday and Thursday.
"With the highs climbing up into the mid-90s and the moisture in air, the combination of heat and humidity will cause heat index values of near 100," today and Tuesday, said Calvin Meadows of the National Weather Service.
That weather can be dangerous for some populations and Meadows said that people should avoid intense activity, wear light-colored clothing and drink plenty of water. Pets should not be left in hot cars, and also should be given plenty of water.
In addition, the Baltimore City Health Department recommends that city residents avoid alcohol and caffeine, wipe skin with cool water as needed, stay inside during the hottest time of day and check on older, sick, or frail people in the community who may need help.
People also should watch out for signs of heat exhaustion and heat stroke, which include confusion, nausea, light-headedness and high body temperature with cool and clammy skin. Anyone experiencing those symptoms should seek help immediately.
City cooling centers are:
Northern Community Action Center, 5225 York Road
Northwest District Community Action Center, 3314 Ayrdale Ave.
Southeast Community Action Center, 3411 Bank St.
Southern Community Action Center, 606 Cherry Hill Road (inside the shopping center, second floor)
Western District Community Action Center, 1133 Pennsylvania Ave.
Oliver Center, 1700 Gay St.
Sandtown-Winchester Center, 1601 Baker St.
Hatton Center, 2825 Fait Avenue.
The Baltimore County Department of Health also opened its three cooling centers today. The centers are open from 10 a.m. to 8 p.m. today and Tuesday. They are:
Essex Senior Center, 600 Dorsey Road, 410-887-0267
Lansdowne Senior Center, 424 Third Ave., 410-887-1443
Parkville Senior Center, 8601 Harford Road, 410-887-5338 (baltimoresun.com)
Monday, July 9, 2007
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)
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)
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