Aug. 17, 2009 -- Gray times call for black and white advice. So here it is: If somebody approaches you and says he or she can help modify your mortgage or save your home from foreclosure, run away. Unless the person suggesting this works for your mortgage company, it's a bad deal.
Abusive foreclosure rescue offers have been around for several years now. I can remember pitching a story about them to management right when I started at ABC News in 2005. Bogus foreclosure rescue businesses are among the most often targeted sectors by state attorneys general and the Federal Trade Commission. And, yet, the schemes persist. Run away!
It's easy to see why. Foreclosures are still at record levels. In July, there were 360,149 U.S. foreclosure-related filings, according to RealtyTrac Inc., an online aggregator for foreclosure properties. That's 7 percent more than in June and 32 percent more than a year ago. Ouch.
But, now, hear this: Private companies that promise to intervene with your mortgage company and save your home are highly suspect. New York Attorney General Andrew Cuomo just filed suit against a firm in his state that was one of the biggest foreclosure rescue firms in the country. Cuomo accused the company of taking large deposits up front and then doing little or nothing to help homeowners. That's the most common pattern.
There's also another scheme that's even more devastating. Some foreclosure rescue firms persuade homeowners to sign their property over to the company, which then rents it back to them. The company rents it to the homeowner for an exorbitant rate they can't afford, and when they fall behind on the rent, the company evicts them and takes possession of their home forever.
Why do people fall for it? Because they are desperate for a glimmer of hope and because the companies are masterful at seeming to offer that hope. Many of these companies grossly exaggerate their success rates. Some even play upon people's religious beliefs, sending people who claim to be pastors to addresses that are listed as close to foreclosure. Some foreclosure rescue companies advise their clients not to make payments on their mortgage, because it will be modified soon. This puts them even further behind and speeds up foreclosure proceedings rather than slowing them.
Mortgage Help: There's Plenty of Legitimate Advice
Crooked companies have even been known to target Spanish-speaking households and deliberately have them sign an English-only contract they do not understand.
Paying for foreclosure rescue is a losing proposition. I'll be so happy when I can stop writing about it. For that to happen, however, people will have to stop falling for it.
For legitimate advice from a HUD-approved mortgage counselor, click here.
For information about the federal government's mortgage modification program, click here.