Mortgage Relief Scams: What You Need to Know

mortgage scam

If you’re in over your head on your mortgage, you may be starting to feel desperate. In these difficult times, it can be easy to see a mortgage relief scam as a lifeline to financial stability. By the time people realize the phony promises and baggage attached to these scams, it can be too late. The best way to avoid mortgage relief scams is to be informed of your rights and what warning signs to look for in a potential scam. Even if an offer looks legitimate, here are some basic precautions you can use to protect yourself against fraud.

The most important thing you can do is understand your rights as a homeowner. In 2010, the Federal Trade Commission published the Mortgage Assistance Relief Services (MARS) rule in order to protect homeowners from mortgage relief scams. This rule holds companies promising mortgage assistance accountable by prohibiting them from collecting any fees until after fulfilling their promises. This means that even if you agree to accept help from one of these companies, you don’t have to pay any money at all until you have received and accepted a written mortgage relief offer from your lender. The MARS rule also bars these companies from saying they work for the government or your lender and requires them to warn you that your lender may not agree to modify the loan.

When trying to spot a scam, a good rule of thumb is that any organization that tries to charge you a fee for mortgage counseling or loan modification is not legitimate. Other than accredited attorneys, the programs that can help struggling homeowners are almost always free. If a company asks you to pay up front or with a cashier’s check/wire transfer, it’s most likely a scam. Other red flags: if they guarantee results, pressure you to “sign now,” or attempt to cut you off from contacting your mortgage lender.

Here are some precautions you can take as a homeowner to protect yourself from mortgage relief scams:

1. Do your research.

Check to see if the establishment has a website and verify that the contact information listed matches the information you have. Make sure the business address is legitimate, and not just a P.O. box. The Better Business Bureau can also provide helpful information; more specifically if the company is associated with any known scams. Do not provide any personal information until you have taken the time to do ample research.

2. Don’t sign without reading the fine print.

Be careful what you sign. Make sure you have read the document thoroughly and understand it completely before you put pen to paper. It is very important for you to understand what you are agreeing to when you sign a document. If you are in doubt about anything, recruit the help of a lawyer to look over the document and explain to you in plain language what the agreement will be.

3. Keep up with mortgage payments.

Some scams advise homeowners to stop making regular payments on their mortgage while they “negotiate” with your lender. Never do this. Missing monthly mortgage payments can increase your risk of foreclosure and damage your credit, putting you into a deeper financial hole. It is also important to note that you should never be sending your mortgage payments to anyone other than your lender unless your lender has directly told you, in writing, to do so.

4. Never sign over your deed.

Under no circumstances should a mortgage relief company ask you to sign over your deed to a third party. There are two times you can sign your deed over: when you sell the home or if you sign it over to your lender in order to fulfill a debt forgiveness agreement. Signing your deed over to a third party will not save your home.

If you do find yourself the victim of one of these scams, the best thing you can do is to report it. This will give you the best chance of recovering some of your money, although the process may be lengthy. You can file reports through the FTC, the Better Business Bureau, the Consumer Finance Protection Bureau, or through an attorney.

Most people fall for mortgage relief scams looking for a quick way to get out of a financial jam, but getting on top of debt takes time and commitment to financial responsibility. If you find yourself in trouble with your mortgage, the best thing you can do is work with your lender to come to an agreement on the situation. Going to your lender directly can be intimidating. Veitengruber Law is here to help. Our experienced NJ real estate legal team can work with you to determine real debt relief solutions for your specific situation.

Advertisements

Mortgage Fraud Red Flags

27039225343_c532a8d8a5_z

Even though 2016 has seen a general slowing of the number of new foreclosures nationally, New Jersey still leads the country with the highest number of properties currently in the foreclosure process, according to figures gathered throughout the beginning half of the year.

Some good news is that the excessive holding pattern, which was created in New Jersey courts during the national mortgage crisis that began around 2007, has been alleviated, expediting the NJ foreclosure process in general. In fact, as of the date of this post, only several hundred homes are “stuck” somewhere in New Jersey’s judicial foreclosure channels. The rest of the 15,000+ NJ foreclosure properties are moving swiftly along and are predicted to take much less than the nearly one year average to make it to Sheriff’s Sale.

The overall housing market in the garden state is in a better place now than it has been since the housing crisis began nearly a decade ago, but there is still significant room for improvement. With that being said, some New Jersey residents are excited by the positive feedback about the housing market, and are once again looking to either list their home for sale or make an offer on a property.

Naturally, this is exciting news for those who make their living in the real estate and/or lending market. Times have been extremely tough for real estate agents and mortgage brokerage firms during the housing crisis.

“Desperate times call for desperate measures.”

Even with the slow improvement in the housing market, home sales simply haven’t returned to their pre-crisis levels yet. Many New Jerseyans who work in the housing industry have had to turn to second jobs in order to support their families; some people abandoned the real estate industry entirely and took up new employment.

A third group, made up mostly of lending companies, remained steadfast in their conviction to wait out the housing bubble. But how did they continue to make money all these years without qualified buyers and with very few homes on the market?

Unfortunately, they did so by using unscrupulous tactics. Because more people turned to renting instead of buying over the past decade, lenders that wanted to stay in business had to actively seek out potential mortgagees. In doing so, they often targeted people who were under-qualified for a mortgage.

A mortgage “scam” is one in which the lender goes to extraordinary lengths to push borrowers through to approval – even when the potential borrowers won’t actually be able to afford the mortgage payments. Naturally, this only perpetuates the foreclosure problem in this country.

Under normal circumstances, a lending company goes to great lengths to ensure that each and every borrower has the capacity to repay a loan before they get approved. Avoiding potential foreclosures is typically at the top of every lender’s priority list.

However, when push came to shove, some New Jersey mortgage company owners acted fraudulently in order to sustain their businesses and to maintain their lifestyles. As the housing market still struggles to return to pre-crisis levels, it’s important that borrowers do their homework on the reputation of any lender who offers them a mortgage. Red flags for mortgage fraud include:

  • It seems too good to be true. This is a good statement to live by in general, but especially when it comes to someone offering to lend you a ton of money. If you keep waiting for ‘the catch,’ and none materializes, you can be sure that the catch is hidden and will make itself known when you least expect it.
  • They’re offering you more than you can afford. Your debt-to-income ratio should not be more than 28%. What that means is that your mortgage payment shouldn’t be more than 28% of your total monthly income (pre-tax). If you’re being offered a mortgage that doesn’t fall within the 28% range, don’t sign.
  • Your loan documents contain incorrect information. If a lender is asking you to put your John Hancock on a mortgage agreement that has ANY false information, walk away. Not only is falsifying mortgage documents a bad idea for your future financial wellness; it’s also illegal.

Bottom line: keep your eyes wide open and do plenty of research before taking on a mortgage as the nation is still in its recovery phase from the housing crisis. It’s always wise to have an attorney who is well-versed in real estate contracts look over your mortgage paperwork before you close on a property. For your peace of mind and your financial stability, bring your attorney along to the closing, too.

 Image credit: Cafe Credit