This article is written to assist California homeowners specifically, since state laws and resources will vary, but the problem is nationwide…
The rapidly increasing number of mortgage defaults and foreclosures has spawned a new and unregulated foreclosure services industry. While some of these companies provide legitimate services, many firms are fraudulent. Because the industry is largely unregulated, it is very difficult for homeowners to research these companies. Some of the fraudulent companies are run by former real estate agents or mortgage brokers, and have very official-looking web sites suggesting that they have government affiliation.
Before you consider hiring a mortgage modification company, check to see what programs your lender has in place, and try to arrrange a mortgate modification on your own. You can learn about most of the current mortgage modification programs here. Unfortunately, there are many cases where a homeowner will not qualify for any of the current loan modification programs.
If you decide to hire a mortgage modification company, check their business background, and ask if they are licensed in the State of California. You can check license status here.
The Typical Foreclosure Con
There are two main types of foreclosure scam. Today’s most common scam involves companies who claim that they will contact the homeowner’s lender(s) to negotiate a mortgage modification, saving the homeowner from foreclosure. The bogus company will charge an upfront (and possibly illegal) fee without doing anything, while the homeowner loses precious time and money.
The second common scam involves the transfer of the homeowner’s title. The homeowner is told they may rent back until they are financially on their feet, at which time they may buy the property back. Instead, the con artist will strip all the equity from the home, and the former owner will lose the home, AND any equity they may have built up in their home. This scam is much less common today, because the decline in real estate values has already “stripped” much of the equity from many California homes. But you might run into this type of scam if you have equity in your home.
Mortgage Help for CA Homeowners
The State of California has an excellent online Mortgage Help Page with links to additional information. If you live in California and are having trouble making making mortgage payments, or your loan is in default, or you are in danger of losing your home, you will find the information helpful. Topics include:
- Trouble making payments
- Avoiding foreclosure
- What to do When losing your home
- Credit Counseling
- Scams
Federal Agencies and Programs
Wherever you live, the following programs offer both online information and some also offer telephone counseling, and there is no cost to the homeowner.
- HOPE (Homeownership Preservation Foundation) Visit their website or call 1-800-995-HOPE (FREE)
- HUD (Housing and Urban Development) Visit HUD’s online Guide to Avoiding Foreclosure or call a HUD Counselor at 1-800-569-4287 (FREE)
- FTC (Federal Trade Commission) Offers information related to Consumer Protection from Real Estate and Mortgage related issues
Tips for Avoiding Foreclosure Scams
In general, you should be very suspicious of any of the following:
- Of anyone who wants the deed to your house for any reason, whether its to clean up your credit or obtain “special” financing from an investor.
- Who offers to rent your house back to you until you can get back on your feet.
- Lenders who encourage you to borrow more than you need or more than the value of your home.
- Terms that change at the last minute or offer next-day approval based on prepayments or up-front fees.
- Of forms you do not understand or that contain blank spaces “to be filled in later.”
- Beware of phony credit counseling agencies charging high fees for financial counseling services you can get for little or no charge through non-profit agencies.
Reference: State of CA: Consumer Home Mortgage Infomation: Beware of Scam Artists
If you think a company is fraudulent, and you live in California, you can file a complaint online here.
References:
List of Hud Approved Counceling Agencies
State of CA: Consumer Home Mortgage Information: Scam Artists
California Attorney General’s Foreclosure Scam Alert
Swindlers Find Growing Market in Foreclosures (NYT)
Tags: CA Loan Modification Fraud, CA Mortgage Modificaiton Fraud, California Loan Modification Fraud, California Mortgage Modification Fraud