Facing Foreclosure? Be careful to avoid bogus Rescue firms.
Hell has a special place reserved for those who prey on the innocent, but until those scam artists fill their reserved slots we all need to make sure we learn how to spot them.
One such group was the Federal Land Grant Company out of San Diego that was shut down earlier this year. This group of heroes used an obsolete Land Grant law that was used when the US purchased properties from other countries over one hundred years ago. Essentially homeowners paid up to $10,000 to place their deeds with this company who said it would shield them from foreclosure. Not so said a judge who evicted some of these victims from their properties, and rightfully so according to the terms of their promissory notes.
Sad to say, this is only one of many rescue scams that exist right now. In the early 90s there were companies that advertised how they could get homeowners out from under homes that were worth less than what was owed on them, something that is still occurring in today’s rescue-frenzied environment. For a few thousand dollars, homeowners could sign over their homes only to learn later that they still owed on the mortgage. Right now what has replaced the once robust real estate market is the troubled homeowners market, and the list goes on.
Since I’m more of a positive guy, I’m going to address the bulk of this article with positive things. First, I’m positive that if you don’t do a little homework or get a few qualified opinions on your specific problem, then you could get screwed. When I say qualified, I don’t mean talking to the guy in the tire store or your neighbor who gets his information off an infomercial. Real Estate and Mortgages are regulated by various government agencies, so start with the local real estate boards or state regulatory agencies for some direction. Or go try going to www.HUD.gov. HUD is the Department of Housing and Urban Development which regulates a whole lot of things real estate and mortgage related. They can help on any federally insured loan or provide resources, which includes FNMA (Fannie Mae) and FHLMC (Freddie Mac). There are a couple of other resources at the end of this article.
Tips and Traps
Here are some very important things to remember when you are facing problems with your home; there are a lot of charlatans out there who want to take advantage of you because they know you are desperate. And there are just as many who have no clue as to what they are doing. Conversely there are a whole lot of people who do want to help and who know what they’re doing, and sometimes that includes your lender. You just need to educate yourself a little. For example, in California there is a Foreclosure Consultant Law, and there some restrictions regarding equity transfers, both are designed to help prevent desperate homeowners from being victimized. If someone is coming to the rescue, ask them if they know what laws govern what they’re doing, if they don’t know then it’s probably a good idea to steer clear.
Another trap that people fall into is thinking that if they deed their homes over to a third party; then they don’t owe their lender anything. Best practice is to read the terms of your note. Most home loans are secured by the property and have special clauses, like a due on sale clause, assignments of rents clause, or other clauses that prohibit you from disposing of the property in some of the creative means other than a traditional sale. In short, you might deed your property over and pay someone to take it, only to find that you are in even deeper trouble as a result. If you don’t understand the terms, for gosh sakes call your lender. Tell them what you are thinking about doing and why. They will tell you if it works or not, and they may even have an alternative solution.
One of the greatest difficulties that lenders have right now is getting delinquent borrowers to return their calls. Now this should come as no surprise; I mean late payments usually mean there are other problems, right? Like getting laid off or having to take a pay cut. So who wants to talk to a lender that will simply add to their problems? But today, some things have changed. Some lenders are now taking the initiative to offer the borrowers workout options before it’s too late. One company out of Utah is a contractor that currently works with about 14 of the largest mortgage services in the country. They go out at the lender’s request to try and do a face-to-face contact with the borrower and then connect them directly with the lender to look at what the best solutions would be in order to avoid a foreclosure. These options can include skipped payments, loan modifications, short-sale options, or help with getting their home sold. All of these are better than foreclosure in nearly all cases.
Reverse Mortgages can help in more ways than one
For seniors in danger of losing their homes, they can often find total relief through a reverse mortgage. I know of a reverse mortgage lender who talks about literally saving a life, and it happened by accident. An insurance agent was making a follow up call on a client and learned that she was bedridden, her electricity had been turned off, and she was about to be foreclosed on despite having equity in her home. She did not have enough income to continue to pay for the in-home care person, and had no family. This was a tragedy beyond compare because of the conditions that she was in, and because of the bleak future that lay ahead. Fortunately, the insurance agent knew there might be an avenue through a reverse mortgage and got her permission to arrange a meeting. In about a month they had this lady set for the rest of her life. The reverse mortgage paid off her existing mortgage that was set to foreclose, and provided her with enough income to pay all of her utilities and resume in-home care and then some.
This is a rescue feature that a lot of people ignore. I know of elderly parents who can’t make ends meet yet could live comfortably by taking out a reverse mortgage. I visited a couple whose home was sweltering in 100 degree weather, but they couldn’t afford to use the air conditioner. They had over $400,000 in equity in their home and could have had income for the rest of their lives without worry, but when I talked with them about a reverse mortgage they said their kids warned them to stay away from it. This is the flip side of the scams. On the one hand you have people looking to take unfair advantage of people, and on the other you have kids who want their parents to live in misery so they can protect their inheritance.
In addition to some lenders wanting to help their borrowers, HUD offers FHA Secure as an alternative program even if you are behind on your payments. This applies to any type of borrower and is part of the HOPE Now program. If you are in trouble, there is help out there for you, but do your homework so that you don’t become yet another victim.
1) If they want money upfront, that’s a flag. Ask for a copy of their license then check them out.
2) If they don’t represent your lender, check them out especially if they have a name that sounds like they might with a government agency. A dot-com on their web name instead of a dot-gov is usually a clue.
3) If it sounds too good to be true, then it probably is. Check them out.
4) If it is too complicated for you, get help from legitimate, qualified professionals. If you go to an attorney, make sure he or she specializes in the field you need help in.
5) Review your mortgage note, and get clarification from your lender. If they don’t want to help you, then document the times you called, who you spoke with. Include the questions you asked and how they answered, then keep looking for a reliable resource.
5) Don’t forget to check with your local and state agencies. Real Estate and Mortgages are regulated federally and through the states, go to your state websites for help. Check with local real estate board of realtors for help in finding who regulates what you are dealing with. The FBI is often who brings these cases to justice, if you are suspicious call them, or call HUD or the department for consumer affairs.
6) Don’t forget to Google who ever it is who is trying to help you, you never know what might turn up. And don’t assume that because they are a non-profit or associated with a church that they will help you. Those who really want to help you won’t mind the scrutiny and will often times point you to the agencies that regulate them.
Ted Beagleman is a pseudonym. Its owner resides in Southern California with his wife and three children, and is a licensed California Real Estate Broker and licensed California Life and Health Agent. He is a former mortgage banking originator and executive with such firms as Chase Manhattan, Wells Fargo, and the former Home Savings of America.