Companies promise mortgage help, deliver nothing
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BBB cautions consumers looking for a break on their mortgage payments
AUSTIN, Texas -- Gloria Kroske took out a second mortgage on her Dallas, Ore. home in better times. Now, she and her husband are struggling to pay their bills on Social Security. Her husband has found work off and on, but multiple health problems make working difficult and medical bills are piling up.
While the Kroskes are current on their first mortgage, the second mortgage has been neglected and the bank has started the process of foreclosure. In December, they were forced to file bankruptcy in order to keep the home they have owned for 30 years.
Kroske said in a moment of weakness, she called National Auditing, a company based out of Austin that advertises nationally. She paid more than $1,000 for the company’s services, but never got the modification she needed. Once she made the last payment, she said company representatives stopped answering her calls.
“I just needed some help and they said that they did auditing and stuff on these mortgage companies, so I gave them a call,” she said. “It’s called desperate.”
Customers nationwide have turned to Better Business Bureau, state attorneys general and the Federal Trade Commission with similar stories. The FTC has issued multiple warnings about loan modification and forensic audit scams. BBB registered approximately 1,400 complaints against loan modification companies in 2011.
Though Kroske needed a loan modification, which changes the initial terms of the loan to lower payments, National Auditing only provided a forensic audit.
Such an audit reviews the terms of the original loan for errors, and the FTC warned “there is no evidence that forensic loan audits will help you get a loan modification or any other foreclosure relief, even if they’re conducted by a licensed, legitimate and trained auditor, mortgage professional or lawyer.”
San Antonio resident Brian Becker fell for a different tactic. He lost $2,500 when he hired a Florida company to help him modify his mortgage. He said Summit Legal Group called him and the representative claimed the company secured loan modifications for 100 percent of its clients.
“He assured me that the reason (the fee) was high was they had 100 percent approval rate,” Becker said. “If -- for any reason at all -- they couldn’t do it, I would get a full refund.”
He said he researched Summit Legal Group online and did not find any negative reviews or hints that there might be trouble. He had researched loan modifications and knew there were restrictions on who could provide such services.
“I thought I was doing my homework here,” he said. “So, I figured OK, I’m doing the right thing going with a law firm.”
He hired Summit Legal Group and paid the $2,500 fee. After not hearing anything for months, a representative from the company called him asking for more money. At that point, he said he knew he had been scammed. Though he was only behind on payments when he originally hired the company, he said he is now facing foreclosure.
In November 2011, the Supreme Court of Florida issued an order barring Summit Legal Group’s owner, William Timothy O'Toole, from practicing law in Florida. The Florida Attorney General has also launched an investigation into Summit Legal Group.
Unlike Kroske, who received a one-time reimbursement from the company holding her first mortgage, Becker never saw any return on the money he paid.
“These people are still walking around on the street, as far as I know,” he said. “They should be locked up. It’s sad to think they’re out there preying on these people’s trust.”
Chris Schneider, a spokesman for the Texas Department of Savings and Mortgage Lending, said companies must be licensed to offer loan modification services, which alter the terms of the original loan. Modifications generally lower a borrower’s payments or interest rate.
He said homeowners should be wary about who they are dealing with, but should not give up hope on obtaining a loan modification.
“Obviously, there have been and probably still are some scam artists in that business,” he said. “But there are some legitimate companies, too.”
Kroske said that as the deadline for foreclosure on her home loomed, she started to feel ever more desperate.
“We’ve lived here and raised our four kids here for 30 years,” she said. “I’m disabled, I’m going blind. So we’re kind of stuck here and don’t know which way to turn or go. ... I almost had a nervous breakdown over this whole thing.”
Consumers who need help with their mortgage should consider the following tips:
· Talk to your lender. Before paying an outside company to negotiate with your mortgage provider, try to get some relief yourself for free. Many companies will work with a consumer to avoid foreclosure.
· Use a licensed company. Any business offering loan modification services must be licensed. Search the agent or company name in the National Mortgage Licensing System to ensure you are not dealing with a scammer.
· Know where to turn. If you feel your mortgage provider is treating you unfairly, file a complaint with TDSM online or by phone at 1-877-276-5550. The FTC also operates a national hotline 24/7 for consumers who need free personalized advice, 1-888-995-HOPE.
· Start with trust. Check out the company’s BBB Business Review at bbb.org to see its BBB rating, complaint history and more.
· Report fraud. If you have been scammed, report your experience to BBB, the FTC (www.ftc.gov); or your state attorney general (www.naag.org).
· Watch for red flags. The FTC lists several warning signs that a loan modification offer may be a scam, including:
guarantees to stop the foreclosure process -- no matter your circumstances;
instructs you not to contact your lender, lawyer or credit or housing counselor;
collects a fee before providing any services or accepts payment only by cashier’s check or wire transfer;
encourages you to lease your home so you can buy it back over time;
recommends that you make your mortgage payments directly to loan modification company, rather than your lender;
urges you to transfer your property deed or title to the company;
offers to buy your house for cash at a fixed price that is inappropriate for the housing market;
pressures you to sign papers you haven’t had a chance to read thoroughly or that you don’t understand.
To check the reliability of a company and find trustworthy businesses, visit bbb.org.
*Consumers willing to speak to the media.
About Better Business Bureau:
BBB's mission is to be the leader in advancing marketplace trust. BBB accomplishes this mission by creating a community of trustworthy businesses, setting standards for marketplace trust, encouraging and supporting best practices, celebrating marketplace role models and denouncing substandard marketplace behavior.
Businesses that earn BBB Accreditation contractually agree and adhere to the organization's high standards of ethical business behavior. BBB is the preeminent resource to turn to for objective, unbiased information on businesses and charities.
Contact BBB serving Central, Coastal, Southwest Texas and the Permian Basin at (512) 445-4748.