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The 2008 Mortgage Fraud Report “Year in Review” published by the Federal Bureau of Investigation reports that mortgage fraud continues to increase (FBI.gov). Maryland, DC and Virginia are in the top ten states hardest hit by mortgage fraud. Due to a declining real estate market, the FBI states that incidents of mortgage relief scams will continue to rise through this year and is expected to increase in the future. Property flipping, short sales, and foreclosure rescues continue to be the main schemes perpetuated; however, new forms of the scams are appearing as reverse mortgage fraud, credit enhancements, condo conversions, pump and pay and loan modifications.

In an effort to cut down on mortgage relief scams, the Federal Trade Commission (FTC.gov) is launching an initiative to educate consumers and prosecute those allegedly involved in defrauding home owners. In a press release dated July 15th the FTC announced the launch of “Real People, Real Stories,” as well as four law suits involving foreclosure relief deception (there have been a total of fourteen such cases since April!).

“Real People, Real Stories” is a video that will educate home owners on foreclosure relief scams and deceptive practices. Actual home owners who were deceived by scammers were interviewed for the video; they divulge and expose how the scammers approached them and operated. The video advises home owners to investigate anyone offering a foreclosure relief program. Home owners are also warned that many foreclosure relief programs have the words “federal,” “U.S.” or “government” in the name, but in reality may not be associated with a government entity.

The video is also a promotion for the Hope Now alliance (HopeNow.com). Hope Now is a partnership of lenders, non-profit organizations, and other mortgage industry participants who are dedicated to offering a coordinated plan to assist home owners.

Operation Loan Lies is a nationally coordinated law enforcement effort to put an end to mortgage relief scams. Actions taken by 25 federal and state agencies are directed toward those who “deceptively marketed foreclosure rescue and mortgage modification services.” FTC Chairman Jon Leibowitz was quoted in the press release as saying; “These con artists see the high foreclosure rates as an opportunity to prey on people in distress…”

Alleged actions by targeted foreclosure relief companies across the country include (but is not limited to) false claims of services, experience and success rates, violating (state) laws prohibiting collecting fees prior to providing services (some up to $5,500), “Do-Not-Call” violations, and misrepresentation.

If you or someone you know is facing financial challenges or foreclosure, Hope Now can connect you to HUD certified counseling agencies. Hope Now resources include instructions on contacting lenders as well as a lender contact list, local counseling agencies, and government agencies. Hope Now also offers a hotline so homeowners can call toll free, 1-888-995-HOPE.

Don’t become another statistic, investigate anyone that offers you foreclosure relief by calling Hope Now as well as local consumer protection agencies (such as the Maryland Attorney General Office Consumer Protection Division, and the Montgomery County Office of Consumer Protection). If you suspect a foreclosure relief scam, the FTC would like your help by reporting such activity by calling 1-877-FTC-HELP; complaints are collected and given to federal and local law enforcement agencies.

By Dan Krell
Copyright © 2009

This column is not intended to provide nor should it be relied upon for legal and financial advice.

by Dan Krell

Earlier in December, a new mortgage relief program was announced as the Bush-Paulson Mortgage Plan. The plan, although not yet approved nor agreed to by all parties involved, is intended to help those home owners who have sub-prime mortgages with interest rates that will adjust significantly higher. Proposed details, as revealed in a December 5th, 2007 Financial Times article, include a five year interest rate freeze for sub-prime adjustable rate mortgages that were dated between 2005-2007 and whose rates are to increase between 2008-2010. Lender participation will be voluntary. Additional borrower qualifications include having less than three percent equity in their home, not being more than sixty days behind on their mortgage payment, as well as demonstrating an inability to afford any mortgage increase (www.ft.com/cms/s/0/c4b23f82-a37c-11dc-b229-0000779fd2ac.html).

Many Wall Street investors have criticized any workout plan as excessive government intervention in a market that is already correcting itself. Some in the industry have described such intervention as delaying the inevitable for those in foreclosure, explaining that many home owners who can not afford a rate increase now would possibly not be able to afford a delayed (five year) rate increase. Other critics include self described “responsible“ home owners who feel they work hard to maintain their credit and pay their mortgage timely; they claim that any government intervention to help those in foreclosure sends the wrong message.

Others, including Presidential candidates, have criticized the President for not doing enough to help those home owners already in foreclosure. For example, Senator Hillary Clinton (as posted on her website HillaryClinton.com) criticized President Bush’s plan and proposed an alternative plan that includes immediate foreclosure moratoriums and across the board rate freezes. Although well intentioned, many proposed alternatives also have market and socio-economic consequences.

Unfortunately, many home owners who are facing foreclosure don’t know that a workout plan (know as a “loan modification”) may already be possible with their present lender. Of course the home owner must request it. Additionally, the proposed workout must make sense and the home owner must demonstrate a need as well as the ability to afford the modified payments. In many cases, lenders would rather work with financially troubled borrowers than foreclose; the foreclosure process is costly – for both the lender as well as the borrower.

The key to initiating a workout plan is for the home owner to communicate with their lender. Among the many reasons why home owners facing foreclosure do not communicate with their lender include lack of information of their options, misinformed of their options, and psychological stress (including apathy and feelings of hopelessness). The latter being the most prevalent because of the psycho-social complexity, which include the events that brought the home owner to their present financial problem as well as the time and effort involved in attempting to resolve any mortgage issues.

In an effort to assist home owners who are presently facing or at risk for foreclosure, Treasury Secretary Paulson and Housing Secretary Jackson created the Hope Now Alliance as a step in President Bush’s initiative to help American families keep their home. The Hope Now Alliance was created to facilitate communication between borrowers, lenders and housing counselors. For more information on loan work outs you can visit HUD.gov or HOPENOW.com.

This article is not intended to provide nor should it be relied upon for legal and financial advice. This article was originally published in the Montgomery County Sentinel the week of December 24, 2007. Copyright © 2007 Dan Krell.

Category: hope now

Feds to crack down on foreclosure relief scams

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