FTC video on avoiding con-arists who "foreclose" on your home or "help" with foreclosure

Nicole from the FTC sez, "Con artists often exploit our fears to take our money, and right now there are many families in fear of losing their homes. Scammers who promise to stop foreclosure are out to make a quick buck and can turn a homeowner's distress into disaster. Today, the FTC and its partners announced new law enforcement actions against deceptive foreclosure rescue companies. Along with the announcement, the FTC released "Real People, Real Stories," a video about keeping your home. It features people targeted by foreclosure rescue scams and advises homeowners in distress that free help is available from the Homeowner's Hope Hotline at 888-945-4673. We hope you'll post this video, and encourage your readers to get the help they need from a HUD-certified housing counselor. More information about mortgages is available at www.ftc.gov/yourhome."

Real People, Real Stories (Thanks, Nicole!)

• [Jason Olshefsky]

  So a commercial for a housing counseling service warns of fraud perpetuated by housing counseling services? Clever. If I were to make a fraudulent service, I’d invest in a video like this one.

  Of course, I have no idea whether this is a legitimate service or not … I _assume_ it is, but I don’t understand how they provide the service for free. The video implies they’re affiliated with the FTC, but why not announce that?

  Anyway, it’s too bad mortgage companies would rather foreclose than work with people to make an affordable plan, dispelling the myth that banks do not “like to” foreclose.

• [gmpierce]

  A large part of the loss mitigation process is a con, and that applies to many of the “not for profit” certified companies.

  The programs created by congress were a con, and they were voluntary. Congress tried to bribe the lenders to mitigate loans, without understanding that many of the seemingly illogical decisions of the lenders were based on legislation previously passed by congress and the regulatory agencies.

  “Certified” simply means that they will not take your money and run. They may provide the service for free, and it is worth every penny. The available programs give the borrower a very bad deal, and the certified services rarely fight to get a better deal. They take what is available and pretend it is a good deal. But they will not actually steal your money.

  A number of former loan brokers started out in the loss mitigation business. They started with the idea: “how hard can it be?” If you understood mortgages and had been in the business for twenty or so years, it should have been possible to make a dollar and provide a greatly needed service.

  I was acquainted with some former brokers who started out with this attitude – several months ago. For a while, I actually became an unpaid volunteer with one company when the principal became ill.

  It turned out that it could be very hard.

  The lenders had never heard the word mitigation, but they were sure they were not going to like it.

  A process that should have consisted of sending a few documents to the right people was turned into a trial by ordeal – BY THE LENDERS.

  What should have required a few phone calls, and a little negotiation, was turned into a turkey circus. In many cases, the system was set up so you could never talk to the same person twice.

  When the requested documents were sent, the next person in line stated that they had never been received. Much of the time the same info had to be faxed three or four times, and some of these documents were time sensitive.

  When they denied receiving the last two pay stubs, you could not re-send the same info you had already given them – you had to go back to the homeowner to get the most recent pay stubs.

  Many of the lenders allowed no contact with the actual decision makers so it was not possible to conduct a real negotiation. If the approved plan was junk, you still had to ask the client what he wanted to do. If you both agreed to reject the plan, about all you could do is to transmit your complaint to the guy with no power of decision, and hope that the decision-maker would maybe come up with a better offer.

  A number of otherwise honest people were turned into crooks by this whole process. Brokers who simply wanted to do a job found out that they had spent ten times the money they had received (on clerical help) and they were still waiting for the “decision makers” to give a hint as to what they might do.

  Some of these people simply got so far behind that they could no longer get the job done. The money had been spent, and no one in his right mind could have imagined that the lenders could waste that much of their time.

  Once they were that far behind, some of them tried to dig themselves out by selling new clients and using the money to keep operating.

  Naturally, there were some people who were simply crooked and never intended to do an honest job.

  “Mitigations” did actually happen. Mostly, the back payments and late fees were added to principal and a five year arm gave the borrower a break for the next few years. After that, unless we can generate another bubble, he borrower is screwed.

  When I explained this to one borrower (who had his mitigation done by someone else), his response was enlightening:

  “I have a fourteen year old and a sixteen year old in school. I want them to graduate with their friends. After five years I will call up the lender and ask them where to mail the keys”

  This is the blind conning the blind and the lenders are now trying to insure that when they do a mitigation, the borrower will be on the hook for any deficiency should the loan go belly-up in the future.

• [NotACat]

  @Jason #1: You did notice that the video was endorsed by “Nicole from the FTC”, right? What actually is your point, then?

• [Quothz]

  @#1: It’s pretty easy to verify that this is legit. Go to ftc.gov, and there’s the video.

• [tmccartney]

  Rule of thumb: if the housing counseling agency is HUD-certified, it’s legit. Those agencies ave particular procedures and guidelines they have to follow, and they can’t charge for loss mitigation services.

• [Anonymous]

  Too many bankos are foreclosing on paid off or no mortgage anwhere houses they have no interest in. The only way to stop these “mistakes” is to drop the civil court charade since these offenses are felonies that carry hard time. All persons involved must get lengthy non concurrent prison sentences.