Buyer Beware (New Scams)

foreclosure_rescueDuring hard times untrustworthy people seek to prosper off others misfortune.  If you are a person who does not have a firm understanding of the credit crisis, the process to obtain a loan modification, or are desperate seeking help then we want to warn you of others trying to take advantage of the average person.  We want to mitigate the occurrences of people losing money to fictitious companies who have used the internet and other tools of communication to take advantage of you.

There are various types of scams that are popping up all over the internet.  Some of these websites that call themselves “foreclosure rescue services” prey on the innocent who have become victims of this troubling economy. 

  • A first indicator of a company trying to scam a person is they ask for money upfront before starting to help a client.
  • A second indicator is these companies may ask you to transfer the title of your home to a third party (DO NOT DO THIS).
  • Third indicator may be the company is a for profit business.

Ever since Former President George W. Bush announced a free consultation service called the Homeownership Preservation Foundation which was to provide guidance to homeowners in suffering; many knockoff companies have arisen on the internet.

In most states such as California some “Loan Modification” companies may ask you to pay an upfront fee of amounts up to and exceeding $3,000.00 in order to begin negations with a bank on your behalf to stop foreclosure.  This is an illegal act in most states. Companies are not allowed to receive money until they have successfully completed the contracted services.  In these cases even if you signed a “legal” contract you may want to consult a lawyer because you may be entitled to money.

There are additional companies out there that will “help” the victim contact and begin negotiations with the bank.  At first you may believe this company may be able to help you because you have called your bank several times and you keep getting transferred to a call center in India.  This employee located in the call center of the bank does not seem to be any help because he/she appears to be answering your questions according to a script that the corporate office sent him/her.  Therefore, you seek help from a third party.

We reviewed several of these companies and noted that they do not provide help or guidance in the modification and are generally a waste an already struggling family’s income.  To prove that these companies are generally profiteers of others misfortune we posted some important excerpts from a “loan modification company”.

Excerpts:

Fees:  The companies are not doing this for free. They are for profit organizations.  If you are read what the contract they ask you to sign before they agree to help a borrower will noticed that directly on the first page of these companies have a section specific for the fees you will be paying them through this process.  It may read something like this depending on the company.

In consideration for the services provided by Company X (The Company herein) under this contract, Client (that’s you) agrees to pay The Company the total sum of ___________________.  Payments shall be paid in installments as noted below in addition to processing fees, which shall be paid by Client in a lump sum, upon execution of this Contract.  Client acknowledges that the (processing fee) is not refundable and is intended to cover The Company’s costs and labor in performing services under said Contract and that no portion of the processing fees is intended to be used for nor shall it be applied towards payment of any portion of the Client’s mortgage indebtedness or as any part of the Client’s Mortgage Modification.  Client acknowledge that The Company is not and shall not be held for the Client’s inability to raise any monies that may be required to be paid by Client in order to qualify or perform under any Mortgage Modification that The Company may procure for Client.

Upon obtaining a Mortgage Modification Plan deemed mutually acceptable to both the client and the Client’s Mortgage Lender, client shall pay The Company the remaining balance of __________________ as compensation for completion of service.

Mortgage Foreclosure Reports belief on the fees being charged to the customer:

Per our understanding of the Fee excerpt from the contract we believe it is imperative to obtain a trustworthy lawyer that can help you through this process. 

Note in the above excerpt they are charging you a nonrefundable processing fee.  We at Mortgage Foreclosure Report are not even sure we understand what a processing fee is for this company.  It is not as if the employees have to mail massive amounts of documents that would exceed anymore than five dollars via the United States Postal Service, and the employee of the company is only calling, mailing and e-mailing your bank.  Additionally, the company takes (after the processing fee) more funds from you by committing you, through the contract, to give them the remaining balance as compensation for their services. 

Cancellation:  All contracts have a cancellation policy embedded in the contract.  Please make sure you understand what happens if you cancel your contract.  Prior to entering into the contract determine if this is something you are serious about following through with the bank.  If it is not and you cancel you may lose a lot of money for no reason.  The cancellation agreement may read something like this:

Client may cancel this Contract by providing written notice to The Company.  Cancellation of the Contract prior to The Banks completion of 1 month(s) services is considered a waiver in favor of The Bank not to complete the 1 month(s) period of service, The Bank will be considered to have it earned it’s fees as stated in the Fees section of the contract.

Mortgage Foreclosure Reports belief on the cancellation policy being issued to the customer:

Maybe after reading the next excerpt you are starting to see a pattern from the company.  The company is looking to obtain their fees and as much money as possible.  If the company’s employee does do a significant amount of work and you do pull out at the last second then it is only fair to pay the company money for the use of their time.  However, if the paperwork sat on employee’s desk for weeks with no one working on your loan modification or you do fully go through the loan modification process is it fair for the bank to obtain a fee? 

Nonetheless, the important item to take from this paragraph is that if you have do decide to cancel the loan modification process you do it by their specifications.  Usually, the bank requires the client to submit their desire to cancel to be in writing during a specific time period. 

Our suggestion would be to submit this cancellation in writing via mail.  You should go to your local United States Postal Service office.  While there request a receipt which will prove the date and time you sent the cancellation policy.  If you would like further information on to develop a better understanding of the option the USPS offers for proof of delivery visit their website at _________________________.

 

Limitations: The limitation section of these contracts is very important as it states what services you are truly going to receive for your funds that you pay the company.

The Company is unable to guarantee that the Client’s Bank will accept a loan modification plan, therefore The Company will contact and submit the required forms and paper work and continue thereafter to contact the client’s mortgage lender (i.e. bank) at a minimum of four times in which they will document all communication with said lender in writing and phone call within a three month period.  If the lender does not return or inform The Company its denial of the loan modification for the Client.  The Company will inform the Client in writing that the services have been completed.  The Company is unable to guarantee that the Client’s mortgage will not default or their home will be foreclosed.  Under no circumstances will The Company be responsible for the client losing their home.  The Company’s only liable to the client will not exceed the total amount fees paid to The Company by the Client.

 Mortgage Foreclosure Report’s analysis of the Limitations:

Per our understanding of the above excerpt the company is only responsible to contact the Bank four times; whether it is through phone calls and or mail.  This is something you can do on your own everyday and save money.  You will eventually get through to your bank if you are persistent in the modification process.  However, if you need help we definitely recommend a trustworthy lawyer.  You may waste a month or two of mortgage payments on some company that will not be able to help you and in the end you still may get a lawyer.  Therefore, save all the trouble of losing money and get help from the correct person before even starting the process.

Disclaimer:  Finally, we will discuss the disclaimer of these companies.

Client acknowledges that The Company is not a law firm and that its consultants (i.e. employees with no education in loan modification) are not attorneys.  The Company does not provide legal advice.  Client acknowledges that the recommendations of The Company shall not be construed as legal opinions or relied upon as such.  The Company recommends that client consult with an attorney regarding the legal consequences of any foreclosure rescue option or loan modification services that client considers accepting.

Mortgage Foreclosure thought on this excerpt:

What they are truly saying in this paragraph is we do not know what we are doing, we are not lawyers, and you should consult a lawyer.  Therefore, what is the benefit in a company such as this one?  Nothing is beneficial. 

The rest of the contract discusses different ways they can extract money from you and how they are not responsible for any illegal actions you may commit or are they responsible financially if you lose your home.  Furthermore, do not go to a third party company like these go immediately to a lawyer for help.

 

Note that loan modifications have increased by 2000% in some states.  As such we have listed some red flag that could indicate a scam.  Please see below:

  • Complex Acquisition Method: When a company’s proposal for loan modification is complex and suggests contemptible solutions such as transferring the title to a third party so the client can stay in the home without filing foreclosure is usually an indicator of a fraudulent company.
  • Payment of Processing Fees Prior to Receiving Service:  In some situations many people feel they do not understand the loan modification process enough so they obtain a third party (that is not a lawyer) to help.  As we will discuss below this probably not the best option.  However, if you feel you must obtain a third party note the following: As noted above it is illegal for many states to ask for processing fees up front.  An attorney is usually the only person who can ask for a retainer.  The other companies can only collect fees once they have completed the job.  Note processing of a loan modification should not exceed $750.00.
  • Quick Claim Deed: Under no circumstances YOU SHOULD NEVER SIGN A QUICK CLAIM DEED.  This is probably the worst scam in the market.  The fraudulent party coerces the homeowner to sign a quick claim deed.  All homeowner rights are transferred to the fraudulent party or an associate of theirs, however, the homeowner is still left with the financial obligation of the mortgage.
  • Send Mortgage Payments to Only Lender:  If a person asks you to send your monthly mortgage payment to anyone other than your Lender (i.e. bank) immediately dismiss what the party is saying and understand it is a scam.

Prior to dealing with a modification specialist/company ask some simple question:

  • Are they licensed; if yes what is their EID #.
  • What is their mailing address
  • Do they have 15 plus years of experience with Loan Modifications
  • Are they formally Industry Professionals

If they answer yes to these questions then there is a high probability that they are partaking in fraudulent business practices and are looking to deceive their prospective clients.

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Comments

By Dan Waldron on April 19th, 2009 at 10:16 am

I just stopped by your blog and thought I would say hello. I like your site design. Looking forward to reading more down the road.

By beachdude on April 20th, 2009 at 8:53 pm

A Mortgage Modification is a process whereby a home owner’s mortgage is modified and both the lender and homeowner are bound by the new terms of the new mortgage.

The most common mortgage modifications are listed below:

lowering the mortgage interest rate
reducing the mortgage principal balance
fixing adjustable interest rates within the mortgage
increasing the loan term throughout the mortgage
forgiveness of payment defaults and fees
or any combination of the above

 

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