California AG cracks down on foreclosure scams
Attorney General Edmund G. Brown Jr. announced that foreclosure consultants must register with his office by July 1 and post a $100,000 bond in order to do business in California. Failure to do so could result in jail time or fines.
"California is awash with con artists who prey on vulnerable families facing foreclosure," Brown said in a statement. "By forcing foreclosure consultants to submit detailed information to my office and post a $100,000 bond, this registry will help bring long-overdue transparency to this shadowy world."
Foreclosure assistance scams get vulnerable homeowners to divert their limited funds with the promise that an arrangement is being worked out to save their property. Instead, the shady foreclosure rescue companies pocket the cash and leave the homeowner in a far worse situation.
Brown's office said it prosecuted a case earlier this month involving hundreds of homeowners who were duped into sending their mortgage payments to the defendant rather than their lenders. The woman pleaded guilty.
Those who properly register with Brown's office could still lose their status if they are found to have broken any of the laws intended to protect people from deceptive practices and fraud. He said restitution could be paid from the bond his office would be holding.
States all over the country are battling these scams. Federal officials made a big showing in April to continue to get the word out about the scams and that they would not be tolerated.
Brown's office offers the following tips to homeowners who might come in contact with some of these firms:
- DON'T pay money to people who promise to work with your lender to modify your loan. It is unlawful for foreclosure consultants to collect money before (1) they give you a written contract describing the services they promise to provide and (2) they actually perform all the services described in the contract, such as negotiating new monthly payments or a new mortgage loan. However, an advance fee may be charged by an attorney, or by a real estate broker who has submitted the advance fee agreement to the Department of Real Estate, for review.
- DO call your lender yourself. Your lender wants to hear from you, and will likely be much more willing to work directly with you than with a foreclosure consultant.
- DON'T ignore letters from your lender. Consider contacting your lender yourself, many lenders are willing to work with homeowners who are behind on their payments.
- DON'T transfer title or sell your house to a "foreclosure rescuer." Fraudulent foreclosure consultants often promise that if homeowners transfer title, they may stay in the home as renters and buy their home back later. The foreclosure consultants claim that transfer is necessary so that someone with a better credit rating can obtain a new loan to prevent foreclosure. BEWARE! This is a common scheme so-called "rescuers" use to evict homeowners and steal all or most of the home's equity.
- DON'T pay your mortgage payments to someone other than your lender or loan servicer, even if he or she promises to pass the payment on. Fraudulent foreclosure consultants often keep the money for themselves.
- DON'T sign any documents without reading them first. Many homeowners think that they are signing documents for a new loan to pay off the mortgage they are behind on. Later, they discover that they actually transferred ownership to the "rescuer."
- DO contact housing counselors approved by the U.S. Department of Housing and Urban Development (HUD), who may be able to help you for free. For a referral to a housing counselor near you, contact HUD at 800-569-4287 or www.hud.gov.