2011-05-13 / Columnists

Notes On Consumer Affairs

Home Loan Modification Scams
Commentary By Assemblywoman Audrey Pheffer

AUDREY PHEFFER AUDREY PHEFFER Many homeowners are struggling during the economic downturn, and some have found themselves unable to meet their mortgage obligations. To make matters worse, in the past few years there has been a sharp rise in the prevalence of “foreclosure rescue” and loan modification scams aimed at homeowners facing foreclosure or having trouble paying their mortgage. Individuals who fall victim to these scams can lose thousands of dollars and sometimes even their homes. It is important for homeowners to familiarize themselves with these scams in order to avoid becoming a victim.

Most foreclosure rescue and home loan modification scams involve an individual or business claiming to be a credit counselor or loan specialist with a successful record of negotiating on behalf of homeowners to achieve favorable loan modifications with lenders. Many scammers attempt to appear legitimate by using an official sounding name, logo, or website, and some will falsely claim or imply that they are affiliated with a government or non-profit agency. Most of these fraudulent enterprises collect upfront fees, provide little or no service, and then disappear, leaving the homeowner deeper in debt and stuck with their original unaffordable mortgage.

In order to avoid these types of scams, homeowners should be wary of any individual or entity calling itself a “foreclosure service” or “mortgage consultant,” anyone who solicits door-to-door offering similar services, or any business offering to stop or delay a foreclosure in exchange for a fee. Homeowners should not hire anyone that advises them to stop payments to lenders or offers to make payments on the homeowners’ behalf. For more information about identifying scams, you may visit the website of the Loan Modification Scam Alert Campaign established by HUD and NeighborWorks America at: www.loanscamalert.org/. This website includes descriptions of the most common loan modification scams, as well as several real life stories of victimized homeowners.

The Legislature is working to address home loan modification scams. Last year the Governor signed a bill, which I sponsored along with my Assembly colleagues, that requires advertisements for home loan modification and loan counseling services to include a prominent statement indicating that similar services are offered free of charge by government-certified housing counselors.

Homeowners that are falling behind on mortgage payments should contact their lender directly to try and work out an affordable payment plan. If this does not result in a satisfactory outcome, there are several programs run by government agencies and non-profit housing organizations that provide free foreclosure prevention advice and assistance. For more information, you may visit the websites of the Federal Housing Administration at www.fha.gov, the U.S. Department of Housing and Urban Development at www.hud.gov, or the New York State Banking Department at www.banking.state.ny.us/hetp.htm. Lastly, if you believe you have been victimized by a foreclosure scam, you may file a complaint by calling the Attorney General’s Consumer Helpline at 1-800-771-7755.

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