Predators Prowling the Mortgage Market
A District of Columbia woman engaged a mortgage company to modify the loans on three apartment buildings she owned. The company pocketed $3,000, she later complained to the D.C. Department of Insurance, Securities and Banking, yet did nothing. The buildings went into foreclosure and she lost them.
As the housing market in the District has stumbled, more people are complaining to the department about phony offers to modify their mortgage and avert foreclosure – almost three dozen just last year.
For instance, there was the woman who became skeptical when her mortgage company asked her to pay a questionable $8,000 fee to refinance the mortgage on her house. When she checked with the department, she learned that the company was a Florida-based lender not even licensed in the District.
Another D.C. resident saw a television ad and called the company to find out how to modify her mother's mortgage. The representative said that for a fee of $1,000 the company would work with the bank to modify the loan so her mother could afford to stay in her house, in addition to sending her loan modification materials. She provided the company with information to access her bank account and the company took her balance -- $495. After receiving the materials, she couldn't get hold of the company again. .
In the six years since the U.S. housing market crashed, and even as it has begun to recover, ads aimed at desperate homeowners have exploded and scam artists have flourished – to the point where loan-modification offers have become big business. A lawyer in Southern California, for instance, was just indicted for allegedly bilking homeowners nationwide out of $11 million, and other schemes are constantly popping up.
The District's fairly strong real estate rally means foreclosures here are now among the lowest in the nation, according to the real estate firm RealtyTrac. Only North Dakota has fewer per resident.
Still, District residents having trouble making their mortgage payments should be aware and remember: Legitimate loan-modification programs should not require any fees in obtaining this assistance.
The scam artists use advertisements, direct-mail and other marketing materials that promise help in negotiating resolutions of delinquent mortgage payments with the lender by modifying the loan to create an easier payment plan or even help them with a short sale – when the homeowner sells the house for what he can get and walks away from the unpaid portion of the loan. Again, the scammers have one thing in common – they want an upfront fee.
These scam artists are crafty and tend to prey on people who need help the most. These companies might even use words like "promise" or "guarantee," but remember they are not your lender and do not have the authority to make these kinds of promises.
Remember, you can contact your lender directly to request a loan modification; or you can use the free resources available in the District: You can find counselors at the federal Department of Housing and Urban Development, www.HUD.gov, or call (800) 569-4287 for a referral; and local government programs like the Foreclosure Mediation Program.
Meanwhile, be wary of a scam when someone:
• Asks you to pay high fees upfront
• Promises to get you a loan modification
• Asks you to send bank information or other personal information
• Asks you to sign over title to your property
• Asks you to sign papers that you do not understand
• Says you should start making payments to someone other than your loan servicer or lender
• Tells you to stop making mortgage loan payments altogether
• Does little or no work and becomes difficult to reach
If you have any questions regarding loan-modification offers, please call the D.C. Department of Insurance, Securities and Banking at 202-727-8000.
About the Department of Insurance, Securities and Banking
The District of Columbia's Department of Insurance, Securities and Banking regulates the city's financial-services businesses. It has two missions: to effectively and fairly regulate financial services to protect the people of the District; and to create the conditions that attract and retain financial-services businesses to the District. For more information, visit us on the Web at disb.dc.gov.