Mortgage Assistance Relief Scams
Mortgage relief scams have reached an all-time high, with an estimated $3 billion in losses nationally, last year alone. Cash-strapped homeowners are vulnerable to unscrupulous individuals, offering promises of relief from financial burden. Scammers claim that they will negotiate with mortgage lenders to save homeowners from foreclosure ... for a fee. Some are bold enough to claim affiliation with government programs. In each case, scammers make promises, take a struggling homeowner's money and then fail to deliver.
Beware of the following scams that are currently in circulation:
Mass Joinder Lawsuits
A recent twist on foreclosure rescue schemes involves mass joinder lawsuits - the joining of two or more legal issues to be heard in one hearing or trial that overlap sufficiently to make the process more efficient and help courts avoid hearing the same facts/parties multiple times. As part of this scam, distressed homeowners receive an invitation from a “specialized” law firm inviting them to join a mass joinder lawsuit as a way to get a loan modification or avoid foreclosure. The firms charge fees between several thousand dollars to over $10,000 and claim that they will join the case with other homeowners in similar circumstances to file suit against their lender. Many claim that they can stop foreclosures, reduce loan balances, or interest rates or remove the mortgage debt from the home so that the homeowner is free and clear of their existing mortgage. Frequently, there is no attorney reviewing each homeowner's case or the attorney of record is not even licensed to practice in the state where the homeowner lives. Often, homeowners are left in worse financial shape than when they began.
The Forensic Audit
In the forensic audit scam, a mortgage loan “auditor” contacts a distressed homeowner with an offer to have an attorney review mortgage documents to determine if the mortgage company followed the law when filing the mortgage. In exchange for an up-front fee of several hundred dollars, these companies claim that a homeowner can use their audit findings to stop foreclosure, speed loan modification, reduce mortgage debt or cancel the loan entirely. However, there is no proof that a forensic loan audit will accomplish any of these things.
Rent-to-Buy Schemes involve a company convincing a homeowner to surrender title to their home while remaining in the home as a renter with a promise that they can repurchase the home at a later date. The company claims that this will give the homeowner a better credit rating and more financial options. However, the terms of the deal are so typically expensive that the homeowner will not be able to repurchase the home. In other instances, the scammer may slowly raise the rent until the homeowner can no longer afford it and is evicted.
In this scam, a company contacts a homeowner promising to negotiate with the lender for a fee in phony counseling scams. In some cases, they claim to be attorneys. They may advise the homeowner to stop talking to their mortgage company or advise the homeowner to make the mortgage payments directly to them while they deal with the lender. Once they've collected their money, they stop returning phone calls and then disappear.
Know Your Rights
Under the FTC's Mortgage Assistance Relief Services (MARS) Rule, it's illegal for a company to ask for payment until the company gives you a written offer of loan modification or other relief from the lender AND the homeowner accepts the offer. Companies must disclose that they are not associated with the government in their advertisements and telemarketing calls. The company cannot tell you to stop contacting your lender. They must tell you that your lender may not agree to change the loan and failure to pay your mortgage could result in the loss of your home or damage your credit rating. The company must also remind consumers of their right to reject the offer without any charge.
Attorneys are generally exempt from the rule if they meet three conditions: they are engaged in the practice of law, they are licensed in the state where the consumer or the dwelling is located, and they are complying with state laws and regulations governing attorney conduct related to the rule. To be exempt from the advance fee ban, attorneys must meet a fourth requirement – they must place any fees they collect in a client trust account and abide by state laws and regulations covering such accounts.
For additional information, contact the Florida Department of Agriculture and Consumer Services at www.800helpfla.com or by calling 1-800-HELP-FLA (435-7352) within Florida, 1-800-FL-AYUDA (352-9832) en Español or (850) 410-3800 from outside of Florida.