Minnesota Attorney General's Office
1400 Bremer Tower
445 Minnesota Street
St. Paul, MN 55101
M - F 8 am - 5 pm
Mortgage Assistance Scams
Minnesota homeowners are currently being targeted by companies offering mortgage assistance either in the form of “foreclosure consultants” or “mortgage modification companies.” Scam artists charge upfront fees and fail to deliver on promises to save a home from foreclosure or to modify a borrower’s loan terms. No homeowner should pay fees up-front for mortgage assistance. There are non-profit organizations that provide mortgage assistance for free as part of their mission.
If you are a homeowner that has fallen behind on your mortgage payments, you are not alone. Millions of Americans face mortgage problems. If you are faced with resetting mortgage rates, mortgage default, or foreclosure, arm yourself with information, get the right kind of help, and take decisive action to protect your interests.
Mortgage Assistance Scams
There are several types of mortgage assistance scams that can waste homeowners’ money and precious time: 1) Foreclosure Consultant Scams, 2) Mortgage Modification Scams, 3) Forensic Loan Audit Scams; 4) Refinance Scams; and 5) Mortgage Settlement Scams.
1. Foreclosure Consultant Scams. Foreclosure Consultant Scams typically target a borrower whose mortgage is in default or who is already facing the foreclosure process. Some organizations or individuals may represent themselves as counseling agencies but are actually only out to make a profit off the misfortune of others. Typically, these entities will ask for up-front fees in exchange for “counseling” services such as financial advice, negotiating payments or other solutions with the lender, or exploring the sale of the property. These are services that borrowers can do themselves and may be offered for free by reputable organizations. Scam artists that collect upfront fees may not actually provide any of the services promised or may even disappear overnight. Under Minnesota law, a foreclosure consultant is prohibited from collecting a fee until after it has provided a service to you. Don’t be scammed by Mortgage Foreclosure Consulting Scams!
2. Mortgage Modification Scams. A new breed of predatory practice, spun off from the foreclosure consultant scam, has emerged during the foreclosure crisis: the Mortgage Modification Scam. The Mortgage Modification Scam typically targets homeowners who may not yet be in mortgage default or foreclosure but who are concerned about resetting interest rates or worried about their ability to continue making their payments in a troubled economy. Homeowners seeking legitimate assistance are targeted by mortgage modification predators that make empty promises to save their home, modify their mortgage, or provide other mortgage assistance, usually in exchange for the payment of hefty up-front fees. Don’t pay these up-front fees!
3. Forensic Loan Auditors. Forensic Loan Audits are yet another mortgage assistance scam that has recently developed. Forensic Loan Auditors exploit recent news stories of past predatory mortgage lending practices to sell a “Forensic Loan Audit,” which the “auditor” claims will discover violations of state and federal mortgage-lending laws in the homeowner’s mortgage loan. The “auditor” further claims that these legal violations will provide the homeowner with “ammunition” that the homeowner can use against the lender to obtain a faster or more favorable loan modification or to obtain other foreclosure relief. Like Foreclosure Consultants and Mortgage Modification Scams, Forensic Loan Auditors typically ask homeowners to pay hefty up-front fees for their services. In truth, there is no evidence to support the claim that forensic loan audits will help homeowners obtain a loan modification or other foreclosure relief, even if they are performed by an auditor, mortgage professional, or attorney. Don’t be fooled by Forensic Loan Audits!
4. Refinance Scams. Some homeowners become the target of fraudulent refinancing offers. Such fraudulent refinancing offers may begin with a call from an “underwriter,” who may convince the homeowner into believing that the call is from the homeowner’s current mortgage lender and make a refinance offer that is hard to pass up (whether due to low interest rate, no closing costs, guaranteed approval, or the like). After convincing the homeowner to refinance, the homeowner is asked to pay a fee to proceed, but once the homeowner pays the fee, nothing happens and the homeowner is out thousands of dollars. Don’t be pressured to make such an important financial decision right away!
5. Mortgage Settlement Scams. In February 2012, 49 state attorneys general, the District of Columbia, and the federal government announced a settlement with the nation’s five largest banks, Bank of America, Chase, Citi, GMAC/Ally, and Wells Fargo. Reports have been received elsewhere that scam artists are already pretending to be the homeowners’ mortgage servicer in order to obtain personal financial information or seeking an up-front fee to help the homeowner obtain the settlement’s benefits. In the first type of scam, scam artists call the homeowner pretending to represent banks or government agencies and trick homeowners into providing personal financial information. In the second type of scam, scam artists try to get homeowners to pay an up-front fee for assistance getting settlement benefits. If you are eligible for relief under the settlement, it is likely that your bank will contact you, but your bank should not ask you to provide your banking information to determine eligibility. If you’re suspicious, you should end the call and call back using a phone number that you know belongs to your bank. And, you should never pay someone to help you get any of the settlement’s benefits to which you may be entitled, especially since you can contact your bank on your own for free. In addition, the Minnesota Attorney General’s Office encourages you to complete a Mortgage Assistance Report Form, and the Office will contact your bank for you to determine your eligibility. If you’d rather call the bank yourself to determine your eligibility, use the phone numbers provided at www.nationalmortgagesettlement.com.
Homeowners should also be wary of any company, whether it be a Foreclosure Consultant, Mortgage Modification Company, or Forensic Loan Auditor, that claims to be “attorney backed” or that uses attorneys. These companies may tell homeowners that they are exempt from Minnesota’s law prohibiting up-front fees because they use attorneys and that homeowners will receive better service because they are working with attorneys. In reality, these companies at best often use out-of-state lawyers who are not authorized to practice law in Minnesota. These out-of-state lawyers typically require homeowners to sign retainer agreements that provide only minimal services and homeowners often pay thousands of dollars and receive no results. Don’t let this happen to you! Find the right kind of help.
Find the “Right” Kind of Help
If you experience financial trouble that may jeopardize your mortgage payments, ask for help. Timely action can make the difference! The following agencies and organizations may be available to provide information, referrals, and assistance to homeowners regarding foreclosure issues:
U.S. Dept. of Housing and Urban Development
451 7th Street SW
Washington, DC 20410
800-569-4287 or TTY: 800- 877-8339
Minnesota Housing Finance Agency
400 Sibley Street, Suite #300
St. Paul, MN 55101
Minnesota Home Ownership Center
633 South Concord Street, Suite #250
South St. Paul, MN 55075
Lutheran Social Services Financial Counseling
424 West Superior Street, Suite 600
Duluth, MN 55802
(888) 577-2227 or (218) 529-2227
Contact your lender as soon as possible. Ask the lender what the options are. Don’t ignore the problem or correspondence from the lender, as late charges (and other fees) can pile up, compounding the problem. Be realistic about your financial situation. Since each person’s situation is different, there may be a range of solutions. For instance, some borrowers may fall behind temporarily due to a change in work status, health issues, or other short-term economic changes. Other borrowers may have long-term problems in their ability to pay a given mortgage because they could not afford the loan in the first place or are a victim of exploding interest rates. If you’re behind in your payments, consider the following tips:
1. Find a reputable mortgage counselor. Contact the Minnesota Housing Finance Agency or U.S. Department of Housing and Urban Development (“HUD”) to find an approved counselor. A reputable counselor may be able to help you locate funding assistance or negotiate a solution with your lender.
2. Request a loan modification. The lender may be willing to permanently modify the terms of the loan to make it more affordable for you. For instance, if you have an exploding ARM, ask the lender to modify you into a fixed-rate loan that you can afford.
3. Refinance with a new loan. You may be able to find another lender that will give you a loan with better terms (such as a fixed rate) that are more manageable. Before pursuing refinancing, however, review your current loan to determine whether it contains a prepayment penalty. Be on the lookout for refinance scams, and don’t feel pressured to make a decision right away. Although rates may go up or down, taking a day or two to consider your refinancing options should not alter any refinance offer too drastically.
4. Consider reinstatement. Under a reinstatement, you pay off the past-due amount and any fees in order to bring the mortgage current again. Reinstatement may be a good option if your default was caused by temporary financial fluctuations that you are able to rectify.
5. Ask for a forbearance. A forbearance may reduce or temporarily suspend your monthly payments until a set date, allowing you to get back on your feet and begin repaying the mortgage.
6. Set up a repayment plan with the lender. Ask the lender to allow you to pay the past-due amount in partial payments with each of your monthly payments, rather than all at once. This may be more manageable than having to pay back the past-due all at once.
7. Ask the lender to waive fees or penalties. A lender may be willing to waive fees, penalties, or other charges if it believes in good faith that a resolution can be reached where you can begin making timely monthly payments and repay the past-due principal and interest.
8. Explore selling the home. In some cases, selling the house may be the best option. If you have equity built up in the property, this may allow you to benefit financially and perhaps afford another home.
9. Ask if you’re eligible for settlement benefits. Your lender can tell you if your mortgage is eligible for refinance, principal reduction, or other relief under the February 2012 settlement. You can find contact information for settling banks at www.nationalmortgagesettlement.com. If your lender is not responsive or you otherwise need help getting an answer, contact the Minnesota Attorney General’s Office by completing a Mortgage Assistance Report Form.
For more information or assistance, or to file a consumer complaint, you may contact the Attorney General’s Office as follows:
Office of Minnesota Attorney General Lori Swanson
1400 Bremer Tower
445 Minnesota Street
St. Paul, MN 55101
TTY: (651) 297-7206