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Jane Smith* called my office as a last resort. She and her family were packing their belongings and preparing to move as the result of a foreclosure. For months, she had been trying unsuccessfully to persuade her bank to modify her loan so that she could make reasonable payments and keep the home. However, when a foreclosure judgment was entered and a sheriff’s sale scheduled, she almost gave up hope.
Then, Jane heard about the $25-billion mortgage foreclosure settlement between 49 states (including Wisconsin), and the five biggest banks in the nation. She called the Wisconsin Department of Justice (DOJ), and we were able to “escalate” her complaint to the executive office of her bank. The sheriff’s sale was postponed while the bank approved a trial mortgage modification. Due to that modification, Jane and her family have been able to stay in their home of nearly ten years.
Since the mortgage foreclosure settlement was finalized in April, the DOJ has been active in helping to resolve mortgage-related issues between consumers and national banks. The settlement requires the settling banks, among other things, to work with eligible borrowers to restructure their loans to avoid foreclosures -- a result that benefits the homeowner, the bank and the community at large. Sometimes we are able to escalate complaints to the executive offices of various banks, resulting in loan modification agreements with the banks, forbearance agreements, delayed foreclosure actions and other options designed to benefit the homeowner.
Other times, we are able to direct homeowners to resources such as housing counselors, legal aid attorneys, or mediation services. For example, Roger George* realized that he could not avoid foreclosure but was worried that the bank would go after him for the “deficiency” – which is the difference between what he owed and the amount the house would bring at a sheriff’s sale. He called the DOJ, was directed to housing counselors, and ultimately found an attorney. His sale was postponed, giving him extra time to move out, and his deficiency balance was waived.
The DOJ also can help homeowners spot mortgage modification scams. Of course, not all of those who offer loan modification assistance take advantage of consumers. Some do, unfortunately, but there are red flags that serve as warnings that an offer of assistance may be a scam. As a rule of thumb, most legitimate entities do not charge an advance fee for help with a loan modification. Moreover, consumers should be wary if the company demands payment within a short timeframe, or demands payment by a cashier’s check or money order. To validate the legitimacy of a program purportedly affiliated with the Home Affordable Modification Program, or “HAMP,” call the Homeowner's HOPE Hotline at 1-888-995-HOPE (1-888-995-4673) or visit www.MakingHomeAffordable.gov. If you suspect a mortgage modification scam, contact the DOJ’s Consumer Protection hotline at (800) 998-0700 or (608) 266-1852. Or, email the DOJ at the following address: email@example.com.
In general, customers seeking a modification under the settlement should first attempt to work directly with their bank:
However, consumers who encounter difficulties with their banks, or whose loans are with banks other than those listed above, should not hesitate to contact the Wisconsin DOJ Office of Consumer Protection. We have trained staff available, including a Special Assistant Attorney General for Mortgage Foreclosure Mitigation, to assist consumers and provide resources. You also can find resources on our website here.
*Names and some characteristics of each story have been changed to protect the identity of the homeowners.