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Middletown Attorneys Advise New York Residents How To Avoid Foreclosure Rescue Scams

Desperate homeowners terrified of losing their home through foreclosure can easily fall prey to foreclosure rescue scam artists, who zero in on their targets using a variety of tactics. Some sift through public foreclosure notices in newspapers and on the internet or through public files at local government offices and then follow up with personalized solicitations by mail, telephone, e-mail or in person. Another tactic involves mass media advertisements on the Internet, on television and radio, or in newspapers. Sometimes the goal of these scammers is to collect some up-front fees from you and deliver nothing in return before disappearing, whereas other schemes are designed to actually steal your house. These predators try to convince you that they want to “rescue” you from foreclosure and offer you one of any number of fraudulent “solutions”. They claim they can solve your debt problems and stop your foreclosure. They use deceptive tactics to separate you from your money or, even worse, get you to sign over ownership of your house for a fraction of its value, leaving you homeless yet still obligated to pay a mortgage that is still in foreclosure.

A homeowner in desperate circumstances should be very wary of:

  • Anyone, except an experienced and reputable bankruptcy lawyer, who guarantees to stop or delay the foreclosure process for an up-front fee. The only “sure fire” way to stop a foreclosure is to file a Chapter 7 bankruptcy or a Chapter 13 bankruptcy, and only a Chapter 13 filing is designed to provide long term relief to the homeowner by affording an opportunity to catch up on past due mortgage payments.
  • For-profit companies with names suggesting a government affiliation, or who claim to be approved by the government.
  • For-profit companies who claim to have relationships with attorneys but do not provide legal services.
  • Anyone who offers to buy your house at a reduced price and lease it back to you, at a low rent, until you can afford to buy it back. The terms of the repurchase agreement are always stacked in favor of the scammer so that the victim cannot successfully complete the transaction.
  • Anyone who offers to pay your mortgage in exchange for putting the deed in their name, allowing you to live in the home as a renter, at a low rent, until you can afford the mortgage payments again. Once you sign the deed, you no longer own the house, the scammer does, and the terms of the “repurchase agreement” are usually so onerous that the victim cannot meet them.
  • Anyone who advises you to send your mortgage payments to them instead of the mortgage company. The scammer will simply pocket the money until you figure out what is going on.
  • Anyone who offers, for an up-front fee, to negotiate with your lenders for reduced interest rates or debt forgiveness. The scammer will take your money and disappear.
  • Anyone who advises you (1) to stop making your mortgage payments, without advising you of the possible consequences of such action, or (2) to ignore calls from your lender or mortgage servicer.
  • Any “bait and switch” scam where the con artists give you papers they claim you need to sign to get another loan to make your mortgage current. Buried deep in the stack of papers is probably a document that transfers title to the scammers in exchange for the “rescue loan”.
  • Anyone who claims all, or most, of its customers get loan modifications or mortgage relief.
  • Anyone (except an attorney in certain circumstances) who asks for an up-front fee before providing any services, or who demands such payment by cash, wire transfer or cashier’s check only.
  • In exchange for an up-front fee, anyone offering to review your mortgage documents and perform a “forensic audit” to determine if your lender complied with the law. Such “auditors” claim that the report of their findings can be used to avoid foreclosure, speed up the loan modification process, reduce what you owe on the mortgage or even cancel your loan, while the evidence suggests that such “forensic” reports are best used for lining garbage cans.
  • An equity-skimming scheme where the scam artist offers to find a buyer for your home. The transaction generally involves the homeowner moving out and signing the property deed over to the scam artist, with the homeowner receiving in return a promise to receive a portion of the sale proceeds once the house sells. Once you transfer the deed the scam artist simply rents out the property and pockets the money while the lender goes ahead with the foreclosure, resulting not only in the ultimate loss of your home, but your continuing obligation for the unpaid mortgage balance and any deficiency that may result after the auction sale.

On January 31, 2011, the Federal Trade Commission took a giant step toward regulating the foreclosure rescue industry when it adopted the Mortgage Assistance Relief Services (MARS) Rule. Under the (MARS) Rule, companies offering mortgage assistance relief services:

  1. May not collect any up-front fees, and may collect no fees until such time as they have provided the homeowner (1) with a written offer from their lender or servicer that the homeowner decides is acceptable, and (2) with a written document from the lender or servicer highlighting the key changes to the mortgage that would result if the offer is accepted. The company must also (1) remind the homeowner of their right to reject the offer without any charge, and (2) clearly tell the homeowner the total fee it will charge if the homeowner accepts the offer.
  2. Must disclose to homeowners that:
    1. They are not associated with the government and their services have not been approved by the government or the homeowner’s lender.
    2. Their lender may not agree to change the homeowner’s loan.
    3. If the company tells the homeowner to stop paying their mortgage, they must also tell them that they could lose their home or damage their credit rating.
    4. The homeowner is free to stop doing business with the company at any time and for any reason.
  3. Are barred from telling homeowners to stop communicating with their lenders or servicers.

Under the MARS Rule, attorneys assisting homeowners in obtaining a loan modification or other mortgage relief can collect an up-front fee, but only if:

  1. The attorney is licensed to practice law in the state where the homeowner lives, or where the house is located.
  2. The attorney is providing real legal services to the homeowner in the modification process.
  3. The attorney is complying with state laws and regulations governing attorney conduct related to the matter at hand.
  4. The attorney must place any fees collected in a client escrow account and abide by state laws and regulations covering such accounts. Among other things, an attorney may not: (1) withdraw money from the client account before the attorney earns fees or incurs expenses; (2) share legal fees for MARS-related services with non-attorneys; (3) “front load” fees to expedite the withdrawal of funds from the client’s account; (4) fail to keep complete records of transactions associated with a client escrow account; or (5) engage in a widespread telemarketing operation staffed by non-attorneys.

The best advice we can give homeowners about foreclosure rescue scams is to avoid them completely. For reliable and straightforward advice about dealing with a problem mortgage, contact the Orange County bankruptcy and foreclosure lawyers at Hayward, Parker, O’Leary & Pinsky Esqs. for a free consultation.