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DOJ & DATCP Warn Homeowners About Loan Modification & Foreclosure Scams

 

- The Wisconsin Department of Justice joins the Wisconsin Department of Agriculture, Trade and Consumer Protection in issuing a consumer advisory on foreclosure "rescue" services and loan modification offers.  In recent months, the number of complaints about these practices has increased.

 

"These "rescuers" often attempt to make a quick profit or commit outright fraud by preying on a homeowner's financial and emotional distress," says Attorney General J.B. Van Hollen.  "While we will pursue those who perpetrate these scams, it is important that the public be aware of the tactics being used so that they can take steps to protect themselves."

 

Janet Jenkins, Administrator of the Division of Trade and Consumer Protection also urged homeowners to be aware of this form of fraud.  "The Department has seen an increase in complaints involving foreclosure rescue and loan modification scams," Jenkins said.  "Homeowners are being bombarded with advertising from companies claiming they can save homes, reduce mortgage payments or find free money for consumers. 

Unfortunately, often the only one that receives any benefit from these transactions is the business committing the fraud."

 

The two most common forms of these frauds are loan modification scams and foreclosure rescue scams:

 

Loan Modification Scams

In loan modification scams, individuals or companies promise to help distressed homeowners avoid foreclosure or find better mortgage terms by obtaining a loan modification.  Some advertisements even make it sound as though the company is affiliated with the government or a bank.  Some homeowners report that the company attempted to obtain upfront payments, backdated  checks, requested access to the homeowner's checking account for direct withdrawals, or even sent a notary to their home to sign incomplete documents.  Be suspicious of anyone who approaches you by letter, by phone or who simply shows up on your doorstep promising to help modify your mortgage loan.

 

Foreclosure Rescue Scams

These schemes typically involve businesses that claim they can assist consumers who are facing foreclosure. Usually, the business offers replacement financing or "creative" transactions that they promise will save the family home.  More often than not, homeowners end up transferring title to their home to the "rescuer" for a price that is far below market value.  Homeowners are also frequently told they will be able to live in their home and repurchase it at some later point in time.  In many cases, these promises are wholly deceptive and result in homeowners losing their home to the so-called "rescuer."  To avoid this fraud, consumers should be wary of responding to advertisements such as, "We Buy Houses for Cash" or "Avoid Foreclosure".

 

The Federal Trade Commission has also warned the public about the prevalence of both foreclosure rescue and loan modification scam.  View FTC Warning.

 

5 Tips to Avoid Fraud

 

Don't pay up-front fees.  The law prohibits foreclosure consultants from collecting money before they perform services.  

 

Don't ignore letters from your lender or loan servicer.  Responding to those letters is your best bet for saving your house.

 

Don't transfer title or sell your house to a "foreclosure rescuer."  Beware!  This may be a fraud to convince homeowners they can stay in the home as renters and buy their home back later.  It might also be part of a fraudulent bankruptcy filing.  Either way, the "rescuer" can evict the homeowner and resell the home.

 

Don't pay your mortgage payments to anyone other than your lender or loan servicer. Mortgage consultants often keep the money for themselves.

 

Never sign any documents without reading them first.  Many homeowners think that they are signing documents for a loan modification or for a new loan to pay off their mortgage.  Later, they discover that they actually transferred ownership of their home to someone who is now trying to evict them.

 

For Free Help:

Contact a HUD approved counselor.

Contact the federal "Making Home Affordable" to check on your eligibility for assistance.

 

Homeowners who believe they have been a victim of a loan modification or foreclosure rescue fraud should file a complaint with the Wisconsin

Department of Agriculture, Trade and Consumer Protection and the Wisconsin Department of Financial Institutions at:

Department of Agriculture, Trade and Consumer Protection

Consumer Protection Hotline
1-800-422-7128
File your complaint online.

Department of Financial Institutions

(608) 261-9555
File your complaint online.