By LEW SICHELMAN
If researchers at the Center for Responsible Lending are on target when they say the country is only halfway through the foreclosure crisis, many more people are going to be conned out of a great deal of money trying to save their homes.
But it doesn't have to be like that. And it won't be if Uncle Sam has his way. The government is coming down hard on swindlers who cheat terrified owners willing to try almost anything to avoid foreclosure. Last month, for example, the Consumer Financial Protection Bureau (CFPB) took steps to shut down two alleged loan modification mills that the agency claims bilked people out of more than $10 million. Earlier in 2012, the Federal Trade Commission put a stop to an operation that convinced desperate owners it could find defects in their loan documents that would make foreclosure unenforceable. For two or three grand, the outfit said, it would scour loan papers, find the improprieties and stop foreclosure proceedings in their tracks. Yeah, right!
Unfortunately, scam artists like these are always one step ahead of the authorities. And wherever there's easy money to be made, they come swarming.
These sharks can read; they follow the news, and ever since the popular press began reporting about the foreclosure crisis, they've focused on the housing market.
People in imminent danger of losing the roofs over their heads will believe any yarn that sounds even remotely feasible.
It's human nature: If you want to believe there is a magic bullet, you will. And the crooks' claims that they can save people's homes are just plausible enough to seem legitimate.
Although the government is attempting to save trusting owners from the charlatans, it is also up to homeowners to recognize the schemes for what they are.
"People need to perform some level of due diligence on anyone who claims they can help save their home," says Scott Gizer, a partner who specializes in real estate at Early Sullivan Wright Gizer & McRae, a Los Angeles law firm.
Here is some advice for spotting outfits that are not on the up-and-up:
a. Be suspicious of official-looking logos and letterheads. They may look legit, but upon closer inspection, they are phony. And so are the pitches.
Both scams that the Consumer Financial Protection Bureau acted against in December used deceptive language and marks in mailings that were designed to mislead consumers into thinking the services were sponsored by or associated with government agencies or programs.
One defendant claimed that, for a fee, it could help people get benefits from a program offering government-sponsored relief.
But in truth, you don't have to pay anything to get relief; you just have to qualify. To find out if you qualify, you can check the official government websites. The rules are usually easy to find and straightforward.
Another telltale sign of a scam is what appears to be a government entity offering aid outside its area of responsibility. For example, the IRS has no jurisdiction over a state tax lien, nor does a state have any authority to release a federal tax lien.
b. Beware of lawyers. Not all lawyers, of course. But the legitimate firms don't make mass mailings. Even a personalized letter could be a come-on from an attorney who has sifted through public foreclosure notices.
Be leery of lawyers who make bold promises or try to pressure you into hiring them.
Before doing anything, get the name and license number of each attorney who will be helping you, then check him out with the local bar, your town or state consumer affairs office, even the Better Business Bureau.
Lawyers who can help must be licensed in the state where you live or where your house is located. They cannot require you to pay anything in advance unless they provide real legal services and comply with state ethics requirements. And they must place your money in a client trust account.
Gizer, the California lawyer, also suggests researching the company or person on the Internet to see if there are any comments, positive or negative, about them.
If there is nothing on the Web, he adds, "be wary, as most legitimate people will have some level of advertising."
c. Watch out for false promises. "Stop foreclosure now." "Over 90 percent of our customers get results."
"We have special relationships with banks."
"Money-back guarantee."
It's not always easy to tell the difference between the scams and the legitimate services.
But one thing is certain: If it sounds too good to be true, it is. So avoid any person or business that promises to halt the foreclosure process, no matter the circumstances. No one can guarantee that.
d. If someone tells you to stop making your mortgage payments, the scheme is bogus. Not making a payment not only damages your credit score but also limits your options.
And run, don't walk, to the nearest exit if you are told to make your payments to someone other than your lender.
e. Avoid anyone who suggests that you surrender the title to your house as part of a deal that allows you to stay on as a renter and buy it back later. Don't fall for the supposed "wisdom" behind this tactic — it won't save your credit and/or allow you to obtain better financing later.
Often, moreover, the terms are so onerous that it is impossible to buy back the house.
Or the rat raises the rent so high over time that you can't afford it and lose the house anyway.
Or he takes your rent but never pays the mortgage, and you not only lose your house but also are still on the hook for the unpaid balance on your loan.
Also avoid anyone who wants to be paid only by cashier's check or wire transfer or who pressures you into signing anything you haven't read thoroughly or don't understand.
Here's where to look for legitimate help:
a. Find free counseling agencies through the Department of Housing and Urban Development (www.hud.gov) or the Homeownership Preservation Foundation (www.995hope.com or 888-995-HOPE).
Help also is available from the Consumer Financial Protection Bureau (www.cfpb.gov). Call 855-411-2372.
b. Report a scam to the Financial Fraud Enforcement Task Force (www.stopfraud.gov), the CFPB (www.cfpb.gov), the Lawyers' Committee for Civil Rights Under Law (www.preventloanscams.org) or your state attorney general's office (find links at the National Organization of Bar Counsel's website, www.nobc.org).
c. File a complaint with the Federal Trade Commission (www.ftc.gov).
Lew Sichelman has been covering real estate for more than 30 years. He is a regular contributor to numerous shelter magazines and housing and housing-finance-industry publications. Readers can contact him at lsichelman@aol.com.
