Homeowners desperate to save their houses from foreclosure are searching for hope, and that can land them in worse trouble.
Regulators say mortgage modification schemes found on the Internet or advertised elsewhere often contain "hope" in their name, in an apparent attempt to link themselves to legitimate programs, such as the nonprofit Hope Now that has partnered with the government to help distressed homeowners. Maryland's program to help troubled homeowners is called Maryland Hope.
"People think they are talking to a state or think they are talking to the federal government and they are really talking to a for-profit," says Joe Cox, program director of Maryland ACORN.
Regulators this year have seen a big increase in modification schemes, where consumers are promised that their mortgage loan terms will be changed to lower their payments. Homeowners usually end up paying stiff fees, get little or no help and can end up losing their homes, according to the Federal Trade Commission.
Since February, the FTC has filed 19 cases involving mortgage relief schemes. The schemes vary, but many use similar methods, says Alice Hrdy, an attorney with the FTC's division of financial practices.
"The claims are very dramatic," Hrdy says. They guarantee a modification or claim a success rate as high as 95 percent, she says.
Companies preying on consumers extract fees either through installment payments or an upfront fee equal to one month's mortgage payment, Hrdy says. (Maryland law prohibits upfront fees for such services.)
Many of these companies try to associate themselves with the government. They may adopt a name similar to a federal program or begin their radio pitch by claiming it's a public service announcement, Hrdy says.
Schemes are created based on what's making news. The new federal Home Affordable Modification Program, which aims to reduce mortgage payments by changing a loan's terms, has been in the news.
Housing counselors say foreclosures are supposed to be halted while an application for the federal program is under consideration. The program has gotten off to a slow start. Some desperate homeowners waiting months for a modification sometimes lose patience and turn to companies making false promises, says Cox, whose group is affiliated with ACORN Housing, a government-approved counselor.
"They know they are falling further and further behind and, in many cases, they will not believe the nonprofit housing agency that we have done what we needed to do," he says. "So that's when they turn to these guys."
If you are in arrears on your mortgage or fear you will become so, contact your lender or loan servicer. Also, a free, government-approved housing counselor can help you submit a loan modification application or suggest other options. Call 888-995-4673 to find a counselor.
