Mortgage mess is spawning ground for fraud

NEW YORK (8/27/07)--A new wave of mortgage fraud--spawned by the recent spike in foreclosures--is affecting thousands of vulnerable homeowners and causing federal and state prosecutors to beef up investigations (The Wall Street Journal Online Aug. 18).

Crooks are taking advantage of financially strapped homeowners by offering so-called foreclosure-rescue deals. A recent FBI report confirms different variations on the foreclosure-rescue theme, but generally, rescue companies offer victims a temporary refinancing or sale. In return for being able to remain in the home, the homeowner agrees to make monthly payments until personal finances improve, although new payments often are higher than the original mortgage payment. As a result, the homeowner still cannot make payments, sinks deeper into debt, and is forced to move or be evicted. The new owner then sells the home and pockets the equity.

The U.S. Department of Housing and Urban Development (HUD) offers tips if you're unable to make your mortgage payment:

• Don't ignore the problem. If you don't take action immediately, you'll fall further behind and likely will lose your home.
• Contact your lender sooner rather than later. Ask about options to help you through tough times.
• Open--and respond to--mail from your lender. Failure to open mail cannot be used as an excuse in foreclosure court.
• Understand your rights. Find and read your loan documents; they state what your lender may do if you can't make your payments. Learn about foreclosure laws and timeframes at your state government Housing Office--each state may have different laws. And go to fha.gov/foreclosure/index.cfm for information about foreclosure prevention.
• Set spending priorities. Can you cut certain expenses to help you make your mortgage payment? Consider cutting back on cable TV, entertainment, memberships, vacations and special clothing. If necessary, delay or reduce payments on unsecured debt--such as credit cards--until you've paid your mortgage.
• Turn assets into cash. Do you have a second car, jewelry or even a whole life insurance policy you can sell to help reinstate your home loan? What about taking on a second, temporary job? Every effort you make to beef up finances tells the lender you're willing to make sacrifices to keep your home.
• Don't pay for foreclosure-prevention help. Expect for-profit companies to offer their services--for a fee. They promise help negotiating with your lender, but the fee may cost as much as two or three mortgage payments. Don't bite. Seek free help from a HUD-approved housing counselor.
• Don't become a victim of a foreclosure-recovery scam. If someone claims to be able to stop the foreclosure process if you sign a document appointing them to act on your behalf, that's a red flag. If you sign, you're probably signing over the title to your home to a complete stranger, and you'll be a renter in your own home. Read and understand the terms of all legal documents; get help from a trusted real estate professional, attorney, or HUD-approved housing counselor.

The Federal Reserve has pulled together several web links for anyone facing foreclosure. Go to federalreserveeducation.org/pfed/foreclosure/ for a list of federal and organizational resources. Go to federalreserve.gov/pubs/foreclosure/default.htm for a list of federal-agency-only resources. And for more guidance, read "Lenders, Counselors Help Homeowners Avoid Foreclosure" in Home & Family Finance Resource Center.

courtesy of cuna.org