State Attorney General warns borrowers to avoid mortgage-related scams
SPOKANE – Alexa Young always made her mortgage payments “on time, every time.” Yet, like millions of Americans, recent events conspired to put pressure on the Spokane single mom’s budget, making her monthly mortgage payment harder to meet. After two expensive surgeries and a reduction in the amount of incoming child support, Young found herself at the breaking point. Her mortgage payment was nearly half of her monthly income, leaving barely enough for necessities. She contacted her lender in an attempt to work out new loan terms.
“The paperwork was ridiculously confusing even for someone like me who has a college education,” Young this week explained to a staff member at the Washington State Attorney General’s Office. “The deal I was offered – a forbearance – made me delinquent on my loan for the first time. I had always made my payment on time, every time.”
Young today joined Washington State Attorney General Rob McKenna at SNAP (Spokane Neighborhood Action Partners), a non-profit that provides services to low-income residents, including homeowner counseling services that help borrowers avoid foreclosures and other devastating financial challenges. Through SNAP, Young was able to enter into a loan modification and steady her finances.
“Alexa’s story likely sounds familiar to thousands of people throughout the state – and millions across the country,” McKenna said. “Negotiating with a lender is an incredibly difficult and stressful challenge. We want people to know they don’t have to do it on their own.”
McKenna is in town promoting the Washington Homeownership Information Hotline, which connects struggling borrowers with counselors, such as those at SNAP, who help resolve unaffordable loans. McKenna used funds from settlements with mortgage lenders to help fund the hotline. He says stories like Young’s are why his office spends so much time righting wrongs in the mortgage-lending industry. That work recently involved helping lead negotiations that resulted in a $25 billion settlement with the five biggest lenders.
McKenna noted that discussions are ongoing about how a portion – about $45 million – of Washington state’s proceeds from the settlement might help support programs such as those that provide homeowner counseling.
“We pride ourselves in helping families and individuals move from crisis to self-sufficiency,” said Julie Honekamp, CEO of SNAP. “There’s no shame in acknowledging that due to the loss of a job or a reduction in income – as is common during these tough economic times –you need expert help.”
According to RealtyTrac, which markets foreclosed properties, 1 in every 1,582 Washington state homes and condos received a foreclosure filing in March. Trends in Spokane County are much better than those in other parts of the state, but SNAP still hears from struggling borrowers on a daily basis. One such borrower is Lisa Lloyd, who in 2010 changed jobs in order to spend more time with her kids. When the job didn’t work out, the single mom of three found herself unemployed. She started missing mortgage payments.
“It’s a scary situation to be in,” says Lloyd. “Once you start falling behind on your payments, it feels like there’s no way to ever catch up.”
SNAP counselors were able to help Lloyd renegotiate her loan. She’s now up to date on her payments, and saving $65 a month.
McKenna today also warned local borrowers to watch out for mortgage-related scams. He says many companies and individuals search public records to find foreclosure notices and then contact borrowers with offers to help – for an upfront price. He suggests not waiting until a letter or e-mail offering help arrives.
“If you think you might be at risk of foreclosure, call the Washington State Homeownership Hotline at 1-877-894-HOME,” said McKenna. “Don’t accept any offer from someone who wants you to pay for help obtaining a lower mortgage payment.”
McKenna’s office distributed $600,000 from a 2008 settlement with Countrywide/Bank of America and $550,000 from the Wachovia Wells Fargo settlement to assist the Washington State Homeownership Hotline. The service provides homeowners with HUD-approved counselors who walk borrowers through the process of finding out if their homes may be saved.
McKenna warns that if a consumer faces foreclosure or the risk of foreclosure:
- Stay in your home and gather your financial documents. Print and complete a checklist of information you will need to have available for your lender.
- Request mediation: State law now requires lenders to notify borrowers prior to foreclosure of the availability of foreclosure counseling and the potential for mediation. Foreclosure mediation began on July 22, 2011. Homeowners who wish to participate in mediation must be referred by a housing counselor or an attorney. Information about the program is available at www.homeownership.wa.gov or download this handout (PDF).
- Contact your lender, who may be able to temporarily reduce or suspend your payments or help you refinance with a new loan and better terms. Look up contact information for lenders, loan servicers and Washington state banks and credit unions through the Hope Now Alliance site.
- Take advantage of free counseling and assistance. To be connected to a counselor, call the Washington Homeownership Information Hotline at 1-877-894-HOME (4663). They will be able talk to you about your situation, evaluate options, and explain assistance programs that may be available. You may also contact a Washington HUD-approved housing counseling agency.
- Review refinancing and modification programs.
- Consider possible alternatives to foreclosure.
- Protect yourself and your home from scams and research any offer to help. The Washington State Department of Financial Institutions requires that any provider offering loan modifications be licensed as a loan originator, mortgage broker or consumer loan company. If you choose to go with a loan modification business, verify they have a license by checking the DFI Web site at www.dfi.wa.gov or by calling 1-877-RING-DFI.
- Don't walk away. Even if you lose your home, you may receive money. The market value of your home may have increased since you purchased it. Any unpaid loans or taxes will be withdrawn from the sale price of the house, as well as fees related to the foreclosure process. Whatever money is left after those debts are cleared up is rightfully yours. If you have abandoned the home, you may not receive this money.
Janelle Guthrie, Director of Communications, (360) 586-0725