Foreclosure "Rescue" Scams Escalating
By Sandra Fleishman
The Washington Post
WASHINGTON -- Consumer advocates around
the country are begging states for new laws to help fight
a rising tide of complaints about foreclosure "rescue"
scams, but homeowners can do a lot to protect themselves.
The Boston-based National Consumer Law Center,
which this week issued a comprehensive report on "the
rampant theft of Americans' homes and equity" by con
artists who promise to save houses from foreclosure, offers
advice on how to avoid getting snared.
Prevention is the best medicine, they say,
primarily because if a homeowner falls into a scam's clutches,
it will take considerable money and time, a good lawyer and
sometimes help from state regulators or prosecutors to undo
the damage.
While fraud and forgery may be involved,
and other unfair-trade or deceptive-practices laws may have
been violated, state enforcement agencies often do not have
the resources to help "or don't think they have the authority,"
said Elizabeth Renuart, a co-author of the report. In most
states, she said, "they don't have the ability to save
the house even if you prosecute. That's a civil issue."
The first advice is to ignore the posters
offering foreclosure help that have been slapped up on telephone
poles, in median strips and at bus stops in many working-class
neighborhoods, says the report.
Ignore fliers dropped off on front porches
or stuffed in mailboxes. Particularly ignore hand-written
notes suggesting the "help" is coming from someone
you know or who has your interests in mind.
"These kinds of signs crowd the streets
in Virginia, Maryland, Florida" and other states where
rescue scams are exploding, co-author Steve Tripoli said at
a news conference in Washington in late May. "If the
street signs don't get you, the fliers will."
They're also turning up in Western Washington.
"We hear a lot of stories from people who are getting
lots of things in the mail, getting things dropped off on
their doorstep," said Erin Rearden, a housing counselor
for the nonprofit Fremont Public Association, which aids homeowners
in danger of foreclosure.
Rearden says the offers seem to be increasing.
And they usually sound too good to be true -- a tip-off to
professional housing counselors that the offers aren't legit.
But some owners facing the loss of their home take the bait
anyway because "they're so in despair that they'll take
anything they think is going to help them," Rearden said.
Con artists use an arsenal of tools to reel
in homeowners. They try to rush them into making a decision.
They work to gain their trust by saying "we've been in
the same dilemma," Tripoli said.
They promote themselves as religious and
their help as faith-based. How much trust should homeowners
put in this approach?
"Zero," said A. Linda Taylor,
housing director of The Urban League of Metropolitan Seattle.
"Do your homework."
They also make a lot of empty promises --
like they'll sell the house back to the homeowner at some
point. "We've never seen that in writing," Taylor
said, and owners don't get their homes back.
Still, for whatever reason, many victims
don't realize they've been scammed, she said.
But Renuart is blunt about what's transpiring:
"These are felonies. This is grand theft of your house."
Scams called rampant
The center's report says foreclosure scams
are "rampant," particularly in hot housing markets
where homes can be worth much more than desperate homeowners
realize and where scam artists can essentially "buy"
a property by paying off the amount that is overdue on a loan.
While the rescue "specialist"
may promise to rent the house to the homeowner, with the opportunity
for the family to buy it back later, the rescuer typically
sets the price higher than the financially strapped homeowners
can afford. Then he moves to evict them when they fall short
on monthly "rent" payments.
Many times the underlying mortgage is not
paid off, so homeowners not only are evicted but also still
owe on the original loan amount.
Tripoli said homeowners in financial trouble
should "do the exact opposite of what these scam artists
say to do."
"They tell you, 'Do not talk to an
attorney or to a lender,' " he said, "But if you're
caught in a foreclosure, you need to talk to your lender --
to ask, 'What can we do about restructuring payments or refinancing?'"
Know state rules
Homeowners need to understand foreclosure
rules in their state and where they are in the process.
For example, a homeowner should check to
see if a letter from a lender is a deficiency notice, which
says the homeowner is behind in payments to the lender and
can still take care of the deficiency by paying it off, Tripoli
said. That is opposed to a letter that announces a sale date,
which means the homeowner is subject to a variety of fees
beyond the amount in arrears.
In hot markets, there can be time before
the sale not only to work out a new repayment schedule with
the lender, what is called a loss-mitigation plan, but even
to sell and make a profit, said Marla Webb, a senior adviser
to foreclosure.com, an online foreclosure listing service.
Consumer groups note that selling the house
may be the only option for some because minorities and the
elderly have often been targeted for predatory loans with
high fees and terms and for multiple refinances that drained
their equity. Although they may not want to move, selling
on the open market will save them from their supposed rescuers,
say consumer advocates.
Before taking that step, Rearden suggests
they seek out housing counseling. But they have to be careful
where they go, because some counseling is just another scam
aimed at separating the already financially strapped homeowner
from scarce cash.
"If you pay $1,000 for services, that's
money that could be going to the mortgage," Rearden said.
"You shouldn't have to pay for housing counseling services."
Indeed, said Taylor of the Urban League,
"the majority of legitimate housing counseling is free."
Legitimate services are certified by the
Department of Housing and Urban Development. A list of them
is available on its Web site (www.hud.gov).
Two in the Seattle area are the Fremont
Public Association (206-694-6766) and the Urban League of
Metropolitan Seattle, which hosts a mortgage default group
meeting each Wednesday. (For more information call 206-461-3792
Ext. 3004.)
Homeowners who have been taken by rescue
scams can also try to find a consumer lawyer to represent
them in actions before enforcement agencies, in hearings on
subsequent evictions by the rescuer or an investor, or in
lawsuits alleging fraud or deception.
But knowledgeable lawyers are few, and homeowners
in distress often cannot afford them, consumer groups say.
The cases are so complicated that it takes more time than
many lawyers want to spend.
Tripoli recommends retaining a lawyer through
the National Association of Consumer Advocates (www.naca.net),
which lists consumer lawyers by state. People who cannot afford
a lawyer can try contacting the local Legal Services office,
he said.
But Ira Rheingold, executive director of
the consumer advocates group, said, "The fact is that
there are not many attorneys who do these cases."
Other possibilities for help include local
consumer-protection offices.
If homeowners believe criminal activity
is involved, they can call the prosecutor's office, Tripoli
said.
"That can put a chill on the activity
and maybe buy you some time," he said.
But the report notes that state enforcement
agencies may not be able to help save the home.
"While most state criminal prosecutors
possess a few tools to fight these scams today, they may lack
the resources to tackle the scammers and hold them responsible,"
the report said.
Seattle Times reporter Elizabeth Rhodes
contributed to this article.
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