Mortgage relief schemes increase foreclosure risk
The Federal Trade Commission is going after six more companies that claim to help you avoid foreclosure. This brings the total count to 48 in the crackdown against alleged phony foreclosure rescue operations. In separate actions, the Consumer Financial Protection Bureau brought charges against additional mortgage relief operations. If you're dealing with a mortgage relief company that contacted you first and charged a big fee up front, stop everything and contact your lender.
We don't hear about it as much as we used to, but people of all income levels are still struggling to keep the place they call home from going to the bank. Dave Mahoney was seduced by a professional sounding company that called him on the phone offering the mortgage relief he so desperately needed.
"I felt relief. I felt like there was somebody there that was 'gonna help me out," said Mahoney. "And I filled out all the paperwork and they said, we'll need a first installment of fifteen hundred to get going on this."
In all, he paid $2,600 dollars believing the legit-sounding company was working with his bank.
Did they help get his mortgage modified or his payments reduced?
"No. Nothing. Nothing happened," Mahoney said, explaining how he was instructed to stop paying his mortgage, and wait.
By the time his actual lender called about delinquent payments, the scammers were making themselves scarce. His money was gone. Foreclosure was near.
Mortgage relief operations target homeowners who'll do almost anything to avoid becoming a foreclosure statistic. Attorneys at the Northwest Consumer Law Center warn that these people are very convincing. Mahoney's attorney Katy Box says he contacted her in the nick of time. She was able to get a mediation started on his behalf, and halt the foreclosure proceedings against Mahoney's mortgage loan.
In a new version of the foreclosure relief scam, Box says the phony promoters actually fake an approved loan modification.
"They approve the borrower for a modification. They tell them, 'Okay if you make these monthly payments to us, if you make three of them, your loan will be permanently modified and you can't be foreclosed on.' So the client will make the payments to the scam company, not the mortgage company- thinking their loan is modified," Box said.
Box says some of the bogus loan mod approval documents look so real it's frightening. The scammers even mimic the official government logo and terminology.
"To me, I can see how someone would get fooled. The documents look so legitimate. It's scary." said Box.
Now that Dave has a truly legitimate local attorney working with his bank, he knows he's very lucky. Because in most cases, giving money to strangers who contact you first and promise mortgage relief almost guarantees you'll end up losing your home.
In yet another new scheme, scammers are calling the same loan mod scam victims posing as refund specialists. They promise to get back the money consumers lost in the loan modification scam -- for an up front fee.