If researchers at the nonprofit Center for Responsible Lending are on target when they say the country is only halfway through the foreclosure crisis, many more people are going to be conned out of a great deal of money trying to save their homes.
But it doesn't have to be like that. And it won't be if Uncle Sam has his way.
The government is coming down hard on swindlers who cheat owners willing to try almost anything to avoid foreclosure. In December, for example, the Consumer Financial Protection Bureau took steps to shut down two alleged loan-modification mills that the agency says bilked people out of more than $10 million.
Earlier in 2012, the Federal Trade Commission put a stop to an operation that convinced desperate owners it could find defects in their loan documents that would make foreclosure unenforceable. For $2,000 or $3,000, the outfit said, it would scour loan papers, find the improprieties and stop foreclosure proceedings.
Unfortunately, scam artists like these are always one step ahead of the authorities. And although the government is trying to save trusting owners from the charlatans, it is also up to homeowners to recognize the schemes for what they are.
"People need to perform some level of due diligence on anyone who claims they can help save their home," says Scott Gizer, a partner who specializes in real estate at Early Sullivan Wright Gizer & McRae, a Los Angeles law firm.
Here is some advice for spotting outfits that are not on the up and up:
• Be suspicious of official-looking logos and letterheads. They may look legitimate, but upon closer inspection, they are phony. And so are the pitches.
Both scams that the Consumer Financial Protection Bureau acted against in December used deceptive language and marks in mailings that were designed to mislead consumers into thinking the services were sponsored by or associated with government agencies or programs.
One defendant claimed that, for a fee, it could help people get benefits from a program offering government-sponsored relief. But in truth, you don't have to pay anything to get relief; you just have to qualify. To find out if you qualify, you can check the official government websites. The rules are usually easy to find and straightforward.
Another telltale sign of a scam is what appears to be a government entity offering aid outside its area of responsibility. For example, the IRS has no jurisdiction over a state tax lien, nor does a state have any authority to release a federal tax lien.
• Beware of aggressive lawyers. Legitimate firms don't do mass mailings. Even a personalized letter could be a come-on from an attorney who has sifted through public foreclosure notices. Be leery of lawyers who make bold promises or try to pressure you into hiring them.
Before doing anything, get the name and license number of each attorney who will be helping you, then check him or her out with the local bar, your town or state consumer affairs office, and even the Better Business Bureau.
Lawyers who can help must be licensed in the state where you live or where your house is. They cannot require you to pay anything in advance unless they provide real legal services and comply with state ethics requirements. And they must place your money in a client trust account.
Research the company or person on the Internet to see if there are any comments, positive or negative, about them. If there is nothing on the Web, Gizer says, "be wary, as most legitimate people will have some level of advertising."
• Watch out for false promises. "Stop foreclosure now." "Over 90% of our customers get results." "We have special relationships with banks." "Money-back guarantee."
It's not always easy to tell the difference between the scams and the legitimate services. But one thing is certain: If it sounds too good to be true, it is. So avoid any person or business that promises to halt the foreclosure process, no matter the circumstances. No one can guarantee that.
• If someone tells you to stop making your mortgage payments, the scheme is bogus. Not making a payment not only damages your credit score but also limits your options. And don't make payments to someone other than your lender.
• Avoid anyone who suggests that you surrender the title to your house as part of a deal that allows you to stay on as a renter and buy it back later. Don't fall for the supposed "wisdom" behind this tactic — it won't save your credit and/or allow you to obtain better financing later.
Here's where to look for legitimate help:
• Find free counseling agencies through the Department of Housing and Urban Development at http://www.hud.gov or the Homeownership Preservation Foundation at http://www.995hope.com.
• Report a scam to the Financial Fraud Enforcement Task Force at http://www.stopfraud.gov, the Consumer Financial Protection Bureau at http://www.cfpb.gov, the Lawyers' Committee for Civil Rights Under Law at http://www.preventloanscams.org or your state attorney general's office (find links at the National Organization of Bar Counsel's website, http://www.nobc.org).
• File a complaint with the Federal Trade Commission at (http://www.ftc.gov).
Distributed by Universal Uclick for United Feature Syndicate.