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Feature TYLA Project

Helping Texas Homeowners Fight Loan Modification Scams
By:  Shivali Sharma

     Each month, over 11,000 Texas families lose their homes to the emotionally strenuous process of foreclosure. Smelling desperation, scam artists are preying upon the vulnerability of those facing the daunting procedure. The vultures are not lurking behind the shadows. They are out in the open, masking themselves as “foreclosure consultants,” “mortgage consultants,” “foreclosure services,” “foreclosure rescue agencies,” and “loan modification companies.” This month, TYLA published the Loan Modification Scam Pamphlet in collaboration with The Lawyers’ Committee for Civil Rights Under Law. It identifies different types of loan modification scams, lists red flags homeowners can use to recognize companies perpetuating the fastest-growing white-collar crime in America, provides recommendations for self-help, and encourages reporting. 
    
     The modus operandi employed by foreclosure predators are grouped into the following six categories:
• Phantom Help Scams – Distraught homeowners are attracted by imposters falsely claiming to be affiliated with government and government housing assistance programs. They assure their prey that they will negotiate with a mortgage lender to obtain a government loan modification, short sale, or other relief in exchange for a fee. Instead, the imposter runs off with the fee or charges outrageous prices for performing light work that a homeowner could easily complete.
• Lease-Back or Repurchase Scams – In this scam, at risk homeowners are enticed with promises to pay off delinquent mortgages, repair credit, and/or pay off other debt. In exchange, the scammer convinces the homeowner to sign a quitclaim deed, averring that the transfer to a “third-party investor” is just “temporary.” Once the deed transfer is accomplished, a shocked homeowner might find a letter in the mailbox advising that a home is subject to a new mortgage or a notice of eviction from the “temporary” new owner posted on the door.
• Refinance Scams – In this popular scam, a con artist has a homeowner sign a “foreclosure rescue” loan document that is actually a deed-transfer document. He claims that the documents are for a refinance loan that will bring the mortgage current. Once the home is signed away, eviction notices are commonplace.
• Partial-Interest Bankruptcy Scams – To carry out this scam, swindlers promise to save a home from foreclosure if the homeowner makes mortgage payments to them instead of to the mortgage lender and gives a partial interest in the home to others. Then, each holder of a partial interest files bankruptcy. While the bankruptcy court issues a stay delaying foreclosure temporarily, the homeowner’s arrearage to the mortgage company grows as the swindler keeps its claws on the monthly payment.
• Internet and Phone Scams – In this scam, identity thieves convince homeowners to apply for a low-interest mortgage on the phone or over the Internet. The instantly approved “application” prompts requests for Social Security and bank-account numbers, and the rest is history.

     The Loan Modification Scam Pamphlet arrives on the heels of the new Federal Trade Commission Mortgage Assistance Relief Services (MARS) Rule. Among other requirements, MARS requires mortgage relief companies to disclose that they are not associated with the government, the lender may not agree to change the homeowner’s loan, the homeowner can stop doing business with the company at any time, and that the homeowner could lose their home and damage their credit rating if they stop making payments to their mortgage company. Taking effect this month, MARS also prevents advance fee payments. Click here for a full list of disclosure requirements, prohibited claims, exemptions, and information on the advance fee ban. 
     
     The Loan Modification Scam Pamphlet is the second pamphlet published addressing the foreclosure crisis. TYLA also published Facing Foreclosure, a guidebook providing homeowners with a brief overview of the types of Texas foreclosures. With emphasis on non-judicial foreclosure, the booklet identifies critical documents homeowners should locate, guides homeowners through the legal steps involved, and addresses options to avoid foreclosure. To help shield future victims from crafty criminals, we encourage you to distribute these pamphlets to homeowners facing foreclosure. Both are available online for free.