Evelyn Perry was worried about missing an upcoming mortgage payment when she saw a television commercial for a company called Peoples First Financial. The California-based business said it helped consumers avoid foreclosure by negotiating with mortgage lenders
When she called, a representative told her the company could almost certainly get her mortgage rate lowered significantly. Perry hesitantly followed the representative’s instructions to stop paying her mortgage, and she scrounged up the company’s hefty fee: $3,000.
“That was a lot of money,” she said. “But I felt confident that they would help me.”
They didn’t.
Thousands of desperate homeowners across the country have turned to for-profit companies that promise to stop foreclosures and gain loan modifications. The vast majority of the companies, regulators say, are con artists who take large upfront fees and do little, if anything, for home-owners.
“It’s one of the most despicable crimes you can commit,” said R. Scott Palmer, chief of the Florida attorney general’s mortgage fraud task force. “It’s taking the last penny a consumer has and on top of that they lose their house and their credit.”
The companies draw in customers with names that sound like government agencies or mailings that appear to be documents from mortgage lenders, law enforcement officials said. By the time a consumer figures out a company isn’t legitimate, it’s often too late to work out a deal with their mortgage lender, consumer advocates said.
The problem is so widespread that combatting the companies has become a priority for consumer protection agencies nationwide. The Federal Trade Commission last month kicked off a coordinated law enforcement effort involving 189 actions by 25 federal and state agencies.
“People in every state are falling for these schemes,” said the FTC’s Frank Dorman.
In Georgia, the Governor’s Office of Consumer Affairs has 11 open cases involving Georgia-based foreclosure rescue companies — three criminal cases and eight civil cases, said Bill Cloud, the agency’s spokesman.
“Over the past year, it’s truly become a top, if not the top priority of our office, because of the severity of the problem,” Cloud said. Cloud would not reveal the names of companies under investigation.
The Georgia Department of Banking has issued nine cease-and-desist orders in the last three months involving companies in the foreclosure rescue business.
In Florida, one of the nation’s most aggressive states in combatting foreclosure rescue scams, the attorney general’s office has 81 active investigations of foreclosure rescue companies and is reviewing the activities of 86 others, Palmer said. Florida combats the companies under a state law adopted last year banning foreclosure rescue companies from accepting upfront fees.
Florida last month sued a company called FHA All Day. Along with its affiliates, the company collected up to $1 million in upfront fees per month and solicited customers nationwide via the Internet and telemarketing calls that illegally used President Barack Obama’s voice, according to the Florida attorney general. The civil action seeks fines and restitution for victims.
California, one of the nation’s foreclosure hot spots, is also working hard to rein in the companies. Peoples First Financial, the company that drew in Evelyn Perry through television advertising, is one of dozens of companies the California Department of Real Estate has slapped with administrative orders to stop operations because they were not licensed to charge advance fees for loan modification services.
“It doesn’t matter where these companies are, they are operating globally via the Internet,” said Tom Pool, a spokesman for the California Department of Real Estate.
Many consumers seek help because they find it difficult to work out resolutions directly with their mortgage companies. A government report released last week found that loan modifications have been initiated on about 15 percent of eligible loans. But success for consumers varied widely by lender: J.P. Morgan Chase had started modifications on 20 percent of eligible loans, compared with 4 percent of loans serviced by Bank of America, which now includes Countrywide Home Loans Servicing.
Some for-profits may work on behalf of consumers, although law enforcement officials say such companies are rare. Even discerning which are legitimate can be difficult for consumers. Advocates said consumers who are already extremely short of money should not resort to for-profits when a cadre of nonprofits will do the job for free.
“There is no reason somebody should pay for this service,” said Michelle Jones, senior vice president of counseling for Consumer Credit Counseling Service of Greater Atlanta. CCCS is a HUD-approved housing counselor and one of the largest credit counseling agencies in the nation.
For-profit companies often advertise heavily and tell consumers they can guarantee success. “I think one of the reasons the scams work is people think the more you pay for something, the better a service it is,” Jones said.
The widespread problems with foreclosure rescue companies were not well known last summer when Perry, the Lawrenceville homeowner, turned to the California company for help. Perry, 45, and her husband, who is disabled, love the ranch house they bought in 2005 for $134,900. They were first-time homeowners who enjoy their large yard and the small-town feel of Lawrenceville.
When they bought the house, the mortgage payments were easily affordable because Perry worked days as a surgical technician and had a thriving commercial cleaning business she operated at night. “Everything was falling into place for me, and I was just happy,” she said.
But with the economic downturn, Perry’s cleaning business lost contracts and her income took a hit. She had made one late payment on her mortgage and feared she might miss a payment altogether. She wanted to head off any chance of foreclosure.
“I didn’t want to wait until the sheriff pulled up to my house,” Perry said.
First she called Countrywide, her lender at the time. She said she was turned down for a loan modification. Soon, she saw the commercial for Peoples First Financial.
She checked out the company with the Better Business Bureau and called the Georgia Insurance Commissioner’s office – the only resources she could think of. No red flags were raised.
The company said it had attorneys on staff and could negotiate to lower her costly 12.75 percent interest rate. “He said, ‘Oh, that’s ridiculous, we can get that lowered to 5 percent or even lower,’ ” Perry said.
As the months wore on and every mortgage statement reflected a growing past-due amount, Perry started getting nervous. “They said ‘We are still working on it. It’s a lot of people. Have patience,’ ” Perry said.
Peoples First Financial did not return an e-mail request for an interview. Repeated attempts to reach the company by phone were unsuccessful because the company did not answer its telephone.
The company’s Web site is filled with testimonials about its successes, but ripoffreport.com and other Web sites that post consumer complaints about companies contain numerous negative comments about Peoples First Financial.
When Perry learned that CCCS provided mortgage counseling for free, she contacted the nonprofit for help. A counselor there called her mortgage company and was told it would consider a modification for Perry.
CCCS is working on a modification that would lower Perry’s interest rate and allow her to stay in the house. But the missed payments and the nearly $3,000 lost to the company are making it much more difficult for CCCS to work out a deal. “If they had the money they paid [to Peoples First],” Jones said, “their situation would have been resolved by now.”
The company told Perry that her modification was moving forward. But Perry learned after meeting with CCCS that Peoples First Financial had submitted inaccurate information to her lender and that her application had been denied.
“They never told me!” Perry said. “They made me feel confident they were going to help me and it turned out to be bogus.”
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Tips for Consumers
Consumer advocates say homeowners should be wary of any company that uses pitches such as “Stop Foreclosure Now!” and “We guarantee to stop your foreclosure” or “We can save your home.” Many for-profit companies selling foreclosure rescue services never deliver. Here are some tips for homeowners in trouble:
● Never pay an upfront fee to a foreclosure rescue company.
● Seek help from a housing counseling agency approved by the U.S. Department of Housing and Urban Development Search for these agencies on the Web at: www.hud.gov/offices/hsg/sfh/hcc/hcs.cfm
● Never agree to terms that prohibit you from contacting your lender, your housing counselor or an attorney.
● Do not agree to forward your mortgage payments to a foreclosure rescue company. Always make payments to the mortgage company.
● Contact your mortgage company directly: You may be able to negotiate a loan modification on your own.
● Be aware that some companies persuade homeowners to sign over the deeds to their homes in exchange for being able to stay in the home as a rental with the option to buy the home back. The terms of these deals are usually so burdensome that they fail and sometimes leave the consumer responsible for the mortgage debt but without ownership of the house.
Sources: Federal Trade Commission, Consumer Credit Counseling Service of Greater Atlanta, Georgia Department of Banking & Finance
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Resources
Consumer Credit Counseling Service of Greater Atlanta offers HUD-approved housing counseling and other assistance: 1-800-251-2227.
U.S. Department of Housing and Urban Development offers a way to search for its approved housing counseling agencies across the country.
U.S. Department of Housing and Urban Development offers advice on avoiding foreclosure and avoiding foreclosure rescue scams
Federal Trade Commission : Learn more about foreclosure rescue scams and avoiding foreclosure and view an informational video.
Home Ownership Preservation Foundation , a nonprofit organization, operates the national toll-free hotline (1-888-995-HOPE) that provides assistance to at-risk homeowners. The foundation is a member of an alliance of mortgage servicers and counselors called Hope Now.
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Where to Complain
Federal Trade Commission
Governor’s Office of Consumer Affairs
Georgia Department of Banking and Finance
Better Business Bureau
Labels: Alpharetta, avoid foreclosure, city of milton, foreclosed homes, foreclosed land, foreclosed properties, foreclosure, Foreclosures, Georgia, how foreclosure works
# posted by
Brian Vanderhoff @ 8:48 AM
