State Attorney General warns borrowers to avoid mortgage-related scams
SEATTLE – Pam Bailey is one of millions of Americans laid off during the Great Recession. The single mom found herself out of a job in 2007 when the bank she worked for merged with another. Her job search was severely complicated by the crumbling economy and bills started to pile up. Bailey missed two mortgage payments on her Kent home.
“It was a nightmare,” says Bailey. “I was stressed out and worried about having a foreclosure notice on my door for the whole neighborhood to see.”
Finally working at a new job, Bailey found herself bogged down by the paperwork required to repeatedly apply for loan modifications. She was turned down six times. Meanwhile her mailbox, email and voicemail burst with offers of help for a fee. Some scammers, one presenting a dozen roses, knocked on her door as late as nine o’clock at night.
Bailey today joined Washington State Attorney General Rob McKenna at Seattle’s Solid Ground, a non-profit agency that provides services to low-income people, to remind struggling borrowers that there’s free help for those who have received foreclosure notices or fear they’re about to. Bailey ultimately received a loan modification, shrinking her payment by nearly $1000 per month. She worries that borrowers in similar situations might give up for not knowing where to find help, and never receive the loan modifications that could save their homes.
“We want people to know that they don’t have to navigate a personal mortgage crisis all by themselves,” McKenna said. “The state’s homeownership hotline is staffed by experts who work directly with lenders – at no charge to borrowers – to resolve underwater mortgages.”
McKenna is referring to the Washington Homeownership Information Hotline, which connects struggling borrowers with counselors such as those at Solid Ground. Current events provide no shortage of clients for the non-profit. According to Realtytrac, a business that monitors and markets foreclosed properties, 1 in 1103 homes in King County received a foreclosure notice in June.
“We take a compassionate approach to helping people navigate their lender’s loan modification application process, request foreclosure mediation or look into alternative housing if homeownership is not sustainable,” said Solid Ground Advocacy Director Tony Lee. “On the other side of the equation are scam artists who look through foreclosure notices, which are public documents, seeking new victims to exploit.”
McKenna today repeated his warning that borrowers should stay away from those who offer potential loan modifications for an upfront fee, adding that such pitches come in email, phone calls and letters. “The bottom line is not to accept any offer from someone who wants you to pay for help obtaining a lower mortgage payment,” said McKenna. “Call the homeownership hotline instead, at 1-877-894-HOME.”
McKenna used funds from settlements with mortgage lenders –$600,000 from a settlement with Countrywide/Bank of America and $550,000 from the Wachovia Wells Fargo settlement – to help fund the hotline, which connects borrowers with non-profit counselors approved by the federal Department of Housing and Urban Development (HUD). He says stories like those told by Bailey 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. He also emphasized another important development involving the settlement: letters from lenders that detail huge benefits.
The recent National Mortgage Servicing Settlement requires servicers to notify eligible borrowers of the programs that may be available to them. Bank of America, Wells Fargo, Chase Mortgage, CitiMortgage, GMAC and their affiliates have been and will continue sending out thousands of letters to eligible borrowers explaining the available programs. Borrowers are beginning to receive the letters detailing potential principal reductions or loan modifications. However, some of the banks report borrowers aren’t responding promptly.
“You must open your letter and respond in order to benefit from the settlement” said McKenna. “If you question whether the letter you’ve received is genuine, you can do several things: you can call your lender directly to confirm whether you are eligible. You can contact a certified housing counselor or you can call the Attorney General’s Office for assistance. We hope people don’t miss their opportunity to take advantage of the assistance we fought to provide.”
McKenna’s office has posted step-by-step instructions, including a how-to video, for borrowers facing potential foreclosure: http://www.atg.wa.gov/foreclosure.aspx.
Janelle Guthrie, Director of Communications, (360) 586-0725