Feds Crack Down on 530 in Foreclosure Rescue Biz – And 21 Tips for Not Getting Scammed
Four years ago, it felt like you could literally find a loan modification scam on pretty much any corner in America… at least in the states hit hard by the foreclosure crisis. And even though you weren’t trying to find them, chances are they were trying hard to find you.
Well, since then the FTC’s MARS Rule has made it more difficult for non-attorneys to offer assistance with loan modifications because unless you’re a lawyer, you can’t accept any money until you’ve obtained a loan modification for your client, and that can take who knows how long. (Attorneys, under certain conditions, are permitted to accept retainers in advance as long as the amounts are deposited in their trust accounts, and only withdrawn as earned.)
The MARS Rule has been a success in the sense that it has provided the FTC, FBI, and state law enforcement officials with a clear path to shutting down and prosecuting loan modification and other types of mortgage assistance scams. And recent announcements by U.S Attorney General Eric Holder, warn that going forward the efforts to eliminate foreclosure rescue scams are only intensifying.
And all I can say is… thank the Lord and Godspeed.
The MARS Rule, however, in other ways is a double edged sword, because while it has caused many to get out of the business, and allowed law enforcement to go after others more efficiently and effectively, it has had another effect that’s not good for homeowners at risk of foreclosure. It’s made scammers harder to identify because now they come in a variety of flavors besides just good old loan modification.
Today, scams are not just for loan modifications anymore, so if you’re stressed out over your mortgage, you really have to stay on your toes or there’s a very god chance you’ll end up getting ripped off for a few grand at least. And if you’re at risk of foreclosure, that’s just about the last thing you need to have happen right now.
MARS, like any law, will never stop scammers. These are individuals that don’t care about what the laws say, which is why they’re called scammers.
A Chilling Reality…
Here are excerpts that show the instructions from a fraud perpetrator who targeted distressed homeowner to a new employee. It’s from the FBI Website, and it’s real.
“Never use your real last name.”
“Make an effort to not meet with customers. I built a huge business without ever meeting a single customer because I explained everything over the phone and e-mailed or faxed everything.”
“Pay cash for everything or purchase [prepaid] gift cards.”
“Purchase a prepaid phone and then go online and create an account with an alias name and address.”
“Purchase an inexpensive laptop and set up a fictitious e-mail account.”
“Purchase software that hides your IP address.”
“Do not use your home Internet. I heard that [company name] is offering wireless cards for laptops and you don’t need your real name or address to get it. You can also find out who has free Wi-Fi in your area.”
“The bottom line is that I want you to become invisible… Be available but invisible… I don’t want your customers hunting you down in case we can’t stop their sales.”
Help From MARS…
Since MARS went into effect a couple years back, the scammers have morphed into all sorts of companies with names that sound official and very safe, but are just wolves in sheep’s clothing, as my mother used to say.
To stay under the radar, many don’t mention modifying loans… instead they’ve come up with very clever ways to sound as if they are safe, important and dedicated to helping homeowners.
There’s the forensic loan audit company, the securitization audit firm… there’s the we’ll-buy-your-home-and–rent-it-back-to-you scam, and the sue-your-bank-for-five grand litigation scam, and as of this past year, as a result of the robo-signing scandal, there are a variety of scams that will tell you your title is clouded… and there’s fraud in your loan because it’s been robo-signed or that MERS wasn’t allowed to foreclose… or insurance paid off your loan three times… and you need to file for quiet title because no one owns your loan and that way you’ll own your home fee and clear.
So, just because the caller doesn’t mention a loan modification, doesn’t mean it’s safe. People getting ripped off today, are finding the scammers harder to spot, and don’t kid yourself… it can happen to anyone. But, as long as you stay calm, think carefully about what you’re being told or reading on a Website, and follow a few rules… you’ll be able to avoid falling for even the most clever and well-orchestrated fraudulent schemes.
First, let me state the obvious… you don’t need to pay anyone to apply for a loan modification. You can contact your servicer directly, or you can contact a HUD approved counseling agency. For more information, call 1-888-995-HOPE or go to www.makinghomeaffordable.gov.
I know what you’re thinking… thank you mister foreclosure genius. We know we can call our servicer directly, and if that worked for us we wouldn’t be reading this in the first place. Okay then… fair enough. You want to hire a lawyer to help you. Assuming you’re anywhere but California, you’re still allowed to do so. And in fact, I’d probably do the same thing.
Why would I hire a lawyer? Well, for one thing, I’m just generally scared of my bank. Okay, not really… scared isn’t the right word, but I’m just not likely to call them when I’m late on a payment… I don’t know why, it’s just me. The other thing is… I’ll get too mad at them to if they say something rude or stupid. Then I’ll start having dreams of killing them all, and stuff like that, so it’s just better that I have someone who knows what they’re doing get in the middle and try to work something out. I know me, and it’s just better for all involved.
21 Tips to Keep You Safe From Fraudsters…
So, if you’ve decided that you want some professional help, here are my tips for staying away from the many different flavors of ethically challenged operators that prey on homeowners at risk of losing their homes…
- Go slow, there’s no rush – Foreclosures today are taking servicers longer than ever, so unless you’ve got a sale date next week or something like that… take your time. Don’t let anyone make you feel rushed… ever. Go slowly and ask lots of questions. The answers you get to those questions will often tell you whether you’re making a good or bad choice.
- Don’t get sold – Lawyers that provide legitimate assistance to homeowners know that there’s no way to know for sure what the servicer is going to do… No third party can guarantee or pre-approve a federal Home Affordable Modification Program (HAMP) application…only your lender has the discretion to grant a loan modification.
- No Advance Fees – Avoid anyone attempting to charge you in advance for foreclosure related services. In 2010, the FTC’s Mortgage Assistance Relief Services Rule went into effect, which banned advance fees associated with loan modifications, although attorneys are generally exempt from this rule assuming they place such fees in a client trust account.
- Trust but verify – The young man (or woman) you’re talking to will be charming, I’m quite sure of that. He will also sound like he knows everything about preventing foreclosures and is confident he can help you. Ask how you can verify that what he’s saying is true. Always ask for references. It’s not rude to say that you want to check out what he’s saying before you commit to hiring his firm. If he tries to talk you out of doing so… walk away.
- A second opinion – Checking with more than one lawyer to verify that what you heard is correct, or just to see whether another lawyer has a different approach is just good business. It’s called getting a second opinion and there’s nothing wrong with telling the person your talking to that you want one. If he or she is legitimate and ethical, they won’t mind at all, and often will be able to refer you to one of their peers.
- Educate yourself – There’s just no substitute for education. Read up on the foreclosure crisis as much as you can, and keep up with what’s happening at least once a week. Your level of knowledge can protect you more than anything else. If you stay up with the news and latest developments, it’s much harder to tell you something that’s not true.
- Suing your bank – Stay away from offers to participate in class action or mass joinder lawsuits that claim will help save your home. If someone is telling you that you should sue your bank, ask how many lawsuits such as the one they’re proposing have been won versus lost in your state. Ask for case numbers of successful cases. Then always get a second opinion from another lawyer. And know this… suing a large financial institution is never easy, fast or inexpensive. So, if someone says they’ll sue JPMorgan Chase for five grand, walk away.
- Claims that sound too good to be true… ARE. When you hear a firm claim to be affiliated with any government agency… run, that’s never true. If you’re contacted by an individual or company who claims to be affiliated with HAMP or displays a seal or logo representing the U.S. government on a letter or a website, verify their claim by calling the federal government’s Homeowner’s HOPE Hotline at 1-888-995-HOPE (4673).
- Check with the State Bar, the Department of Real Estate, and online by using your search engine, such as Google. Look up names addresses and phone numbers and see if the person you’re talking to has been accused of ripping someone else off before. You can also type someone’s phone number into Google and often come up with an address. I recently did this with a number and found the person to be in a home in a residential area, not at any sort of office.
- Go with your gut – When you hear or read claims that sound like exaggerations to you, go with your gut. High-pressure sales tactics to sell you on hiring their firm is a sure sign that something isn’t right. And remember, if you don’t feel right about something, chances are you are right. So, the moment you feel pressured, just walk away.
- NEVER hire a law firm without talking to a lawyer. There is no substitute… no one else will do. Ethical lawyers wouldn’t let you hire them without talking to you first.
- Sign over your title – If someone tries to convince you they can save your home if you transfer your deed to them or if you file for bankruptcy… JUST SAY NO. Some scams require homeowners to transfer their home’s title or make monthly mortgage payments to the purported “rescuer.” It’s always a scam. Never make a mortgage payment to anyone other than your mortgage company.
- Just what you wanted to hear – If someone is saying everything you were hoping to hear, that’s a reason for your scam-alarm to go off immediately. Con artists are often quite skilled at hitting your hot buttons based on what you’ve said, and making friends fast. Watch out for claims of 99% success rates, or that you’ll definitely get a 2% interest rate… those are signs that you’re talking to a sales person and not a legitimate law firm.
- Beware guarantees… because there aren’t any. It’s one thing to value a money-back guarantee from Sears or another large established company, but small firms can pick up and leave anytime and often do. So a guarantee of being able to get your money back is likely worthless.
- Attorney-client privilege – The person you’re talking to says they can’t give you references because of attorney-client privilege or because something is proprietary? Fine… then don’t hire them. If they’re legitimate, they’ll find ways to substantiate whatever claims they’re making.
- Legitimate law firms don’t tele-market to drum up new clients. If they’re calling you out of the blue during dinner or any other time, just say thanks but no thanks. And watch out for loan modification companies that masquerade as law firms. These companies often employ a single attorney, which they think makes them exempt from the MARS rule. in order to skirt the MARS ruling banning the collection of advance fees, masking their fees as attorney retainers or consulting fees.
- Your home state advantage – Don’t hire a lawyer unless he or she is licensed to practice law in your home state, you’ve checked with your state bar to make sure his record is clean, and he has offices you could visit if you needed to.
- All the answers in a flash – No one can know everything about your situation in a single call, without having reviewed your documents or receiving information from your servicer about your loan. So, when someone seems to have all the answers right away, there’s something wrong.
- Loan modifications don’t work – Someone tells you that loan modifications don’t work, no one gets them… and that you have to sue your bank to save your home from foreclosure. It’s not true. Something like 5 million loans have been modified since the crisis began… how many lawsuits have been successful? Nowhere near five million, I can assure you of that. Litigation should never be anyone’s first step, it’s only a last resort.
- Quiet your title and own your house free and clear – Quiet title is a type of lawsuit that is brought to establish a party’s title to real property against anyone and everyone, and thus “quiet” any challenges or claims to the title. You have to believe that there is truly a cloud on your title and if you lose such a suit… you can get stuck with the bank’s attorney fees, which can be very expensive. If anyone tries to talk you into filing such a suit ask whether any have been successful, get specific case numbers you can look up, and always get a second opinion from another attorney before moving forward.
- Timing is everything – There are always con artists all around us. The reason we don’t get conned is that we’re not in a panic. The day we find ourselves panicked over something is the day we’re most susceptible to being ripped off. The key to not feeling panicked is not letting things go to the last minute. And dealing with the risk of foreclosure early is always better than later in the process, so don’t put off thinking there’s plenty of time and not only will you find a better outcome, but you’ll reduce the chances of getting burned making a last minute decision.
Scammers Being Shut Down and Prosecuted…
Because I hear from homeowners all over the country every month, I always have a pretty good feel for what’s going on, and for the past year, I’ve felt strongly that the number of foreclosure-related scammers was increasing.
Admittedly, all I had was anecdotal evidence, but it seemed clear to me that ever since the robo-signing scandal told the country there was fraud and forgery involved in foreclosures, the dynamics of the crisis changed.
Almost overnight, companies selling forensic loan audits began popping up everywhere, now offering to help homeowners identify the fraud in their loans. Securitization audits proliferated as well as did various litigation related schemes. It was no longer as simple as companies offering to help modifying loans, now it was about empowering others to demand adherence to the rule of law.
Homeowners contacting me started telling me of their plans to fight their banks in court on the basis of these audits, legal theories, and other products and services of highly questionable value. It seemed to me that as their numbers grew, so did their anger and scammers were there to take advantage of their rage.
To be entirely candid, I’ve felt helpless. It didn’t matter what I’d tell someone, they didn’t believe me… they wanted to believe something else regardless of whether it was true or not. And even today, it’s one of my greatest concerns about this crisis going forward, because we certainly don’t need what is already a terrible situation to be made worse.
But, this week announcements by U.S. Attorney General, the FBI and FTC of the results of their efforts this past year to stop foreclosure-fraudsters. In October of 2011, the FBI joined with the Department of Justice, the Department of Housing and Urban Development, and the Federal Trade Commission (FTC) to form the Distressed Homeowner Initiative.
Using the combined resources of federal, state and local law enforcement, the initiative targeted perpetrators both criminally and civilly, and led to 285 federal criminal indictments and another 110 federal civil cases, and criminal charges were filed against 530 defendants. These cases cost 73,000 victims across the country more than $1 billion.
These cases, brought over the past year, included “foreclosure rescue schemes” that take advantage of those who have fallen behind on payments.
The Financial Crimes Enforcement Network (FinCEN), as part of its latest Mortgage Loan Fraud Update, has announced that during the first half of this year, 2360 Suspicious Activity Reports (SARs) specifically related to foreclosure rescue scams were filed by financial institutions. While in 2011, the total for the entire year was 2,782.
Not only are the Feds pledging to continue pursuing those that would defraud homeowners in distress, but individual states are getting active as well.
The State of Washington’s Division of Financial Institutions recently filed charges against 40 companies accused of failing to be licensed to operate in Washington and misleading homeowners at risk of foreclosure. The companies are not all based in Washington, some are located around the country, with 17 in California and 10 in Florida.
Well, its about time.