On April 6, 2011, a coalition of fair housing non-profit organizations released their findings of a year-long undercover investigation of 80 "loan modification" (foreclosure rescue) companies, which reveals that the industry is rife with unethical, corrupt and even illegal practices. These practices include over-promising & under-delivering, charging fees for services that are available free from nonprofit organizations and even advising clients on how to commit acts of fraud against their lenders.
The report - which has a GREAT title: “Have I Got a Deal for You! An Undercover Investigation of Mortgage Loan Modification Scams,” was released by The National Fair Housing Alliance, the Connecticut Fair Housing Center, Housing Opportunities Made Equal of Virginia, Inc., and the Miami Valley Fair Housing Center. It documents some of the tactics mortgage modification scammers use to take money from struggling homeowners.
Here are just a few of the results of the report:
- 55% of the scammers required an upfront fee to start work or required a low initial fee to conduct minimal work on behalf of distressed homeowners, such as reviewing loan documents;
- 43% guaranteed or promised they could secure a loan modification even before learning about the homeowners’ financial limitations;
- 24% advised or encouraged homeowners to stop making their mortgage payments or to stop contacting their lenders;
- 16% guaranteed a new, much lower interest rate ranging between two and 6 percent on modified loans;
- 12% discouraged homeowners from seeking free help from government-approved housing counseling agencies;
- 8% encouraged homeowners to provide fraudulent information to their lenders.
None of these findings surprise us here at the MN Home Ownership Center. We hear from homeowners repeatedly that have spent money, lost time and been taken advantage of by less-than-scrupulous mortgage "rescue" operations. If you are struggling with your mortgage, THERE'S NO NEED TO PAY FOR HELP. There is a network of FREE, non-biased housing counseling agencies that can assist. To find your local non-profit foreclosure prevention counselor, click here.
For more information on what's being done in Minnesota to fight foreclosure rescue scams, visit the Center's "Look Before You Leap" website. You can help us fight these scammers in Minnesota!