The nation is slowly coming out of the recession, and unemployment rates are starting to drop. But many people, even after getting a new job, are struggling to catch up on their debts -- especially back mortgage payments. Bankruptcy rates are slowly rising. All too many families, seeking bankruptcy protection or trying to avoid foreclosures, have fallen prey to financial scams. One common scam occurs when a company takes money from a family, agrees to make arrangements for a mortgage loan modification with the bank or lender, and then does nothing, letting the property go into foreclosure. Ironically, some people have gone into foreclosure or bankruptcy right after becoming employed again. Many such families have turned to self storage facilities at the last minute, storing their possessions while looking for a place to live.
That is what happened to John and Traci Figueroa, of Santa Rosa, California. The Figueroas, who both work in the construction industry, were laid off last year. They had managed to save $7000 for an emergency, but when they started using their savings to make their mortgage payments, it ran out quickly, and they went into default on the mortgage. Bank of America notified them in March that it was beginning foreclosure proceedings. But then the Figueroas got jobs again and arranged (or so they thought) for a loan modification.
“As soon as we called and said we had employment, they said it wouldn’t be a problem,” Traci Figueroa said in Tuesday’s Press-Democrat. “That is why I hadn’t packed up. I was even painting the living room.”
As it turned out, though, the company the Figueroas used to arrange their loan modification, Mod Specialist, had not processed their paperwork, and is now unreachable. The Figueroas believe that Mod Specialist was engaging in fraud. Whether or not that is the case, the Better Business Bureau has given Mod Specialist, and several other so-called loan modification companies, an “F” ranking for its failure to respond to complaints.
Finally, Traci Figueroa submitted her own application directly to Bank of America, using the government’s Home Affordable Modification Program. But the foreclosure continued to proceed as the application was processed -- “I called the bank and was told that was just a standard step, and not to worry about it,” Traci Figueroa told the Press-Democrat. But she was worried, and rightly so. The Figueroas had lost valuable time in the foreclosure process trying to work with Mod Specialist. The week that their property was scheduled to be auctioned, the Figueroas had still not heard from the bank. Finally, that Thursday, Bank of America told them the sale was going to go through as planned. The house was sold, and the new buyer told the Figueroas that they had three days to get out of the house. John Figueroa was scheduled to go to the Gulf Coast, though, to help with the cleanup of the BP oil spill.
“I had to leave my wife in a pretty bad situation,” he told the Press-Democrat. “But I have to make money so we can get into a new place. It’s kind of a raw deal.” Meanwhile Traci Figueroa was moving the family’s belongings into self storage and desperately looking for a place to live. “I don’t know where we’re going to go,” she said.
Something similar happened to Rita Santos, a single mother living in Dover, New Jersey. She went to a company offering foreclosure assistance, thinking that it might be able to modify the terms of her mortgage. The company promised her that it could do so -- for $1,600. She sent in her money, but nothing happened. “I was desperate,” Santos told Neighbor News at North Jersey.com last week. “My heart goes out to anyone who has been taken by these scam artists.”
Jerry and Linda Rupert of Osseo, Minnesota, did the same thing. They paid a fee of $2,250 to American Modification Consultants (AMC), hoping to modify their mortgage. “They said our payments could be modified and reduced,” Jerry Rupert said last week in Finance & Commerce, Minnesota’s daily business news source. “They promised me the moon....I feel like a moron.” The Ruperts lost the fee they paid to AMC, which did nothing for them and now cannot be reached by telephone.
In response to homeowners facing similar foreclosure proceedings, Attorney General’s offices in several states have started a list of guidelines to help homeowners avoid loan modification scams. The guidelines below are based on those offered by the California Attorney General’s office:
- Don’t pay an upfront fee to a loan modification company. Legitimate companies should know that federal laws prohibit them from collecting money before services are rendered.
- Even if a loan modification company tells you to ignore letters from the bank that holds your mortgage, do not do so. Instead, respond to the letters in a timely fashion.
- Don’t transfer the title to your house to a loan modification company or any other company offering foreclosure relief. This is a scam used by some companies to evict homeowners and take their homes.
- Find out if the loan modification company, or any mortgage broker who you are considering working with, is licensed in your state. Don’t take the company’s word for it. Phone the appropriate state government office to find out, or look it up at your state government’s website.
- Don’t send your mortgage payments to any entity other than your lender, even if a loan modification company offers to pass on the payments. Some companies do not pass the payments on to lenders, and foreclosures result.
- Never sign any documents without carefully reading them first. If you are able to, have a lawyer read the documents.
- Best of all, do not deal with a loan modification company at all. Deal directly with your lender, using the procedures laid out by the Obama Adminstration’s Making Home Affordable program. To speak with a housing counselor (the call is free), call 1-888-995-HOPE (4673).
Sources used:
California Office of the Attorney General. “Stop Loan Modification Fraud.”
Carlson, Scott. “Home Ownership Center warns of surge in mortage-rescue schemes.” Finance & Commerce. June 29, 2010.
Halverson, Nathan. “Frantic bid to save home.” The Press Democrat (Santa Rosa, CA). July 6, 2010.
Making Home Affordable. The official website of the Obama Administration’s Making Home Affordable program, with information about how to modify or refinance your mortgage.
Schneider, Mike and Aversa, Jeannine. “Economic stress is easing more slowly.” Associated Press. July 6, 2010.
“Volunteers distribute scam alerts to over 1,000 homes in Dover.” Neighbor News (Dover edition). New Jersey.com. June 30, 2010.