Sunday, September 19, 2010

Don't fall for scams: Real mortgage counseling will help secure loan modification for free

The foreclosure crisis is bad enough, but in southern New Jersey and elsewhere it is being worsened by illegal and unscrupulous operators scamming distressed homeowners, government-approved counselors say.

With advertised promises of quick and easy mortgage modifications that would let people keep their homes, these mainly out-of-state operators are getting high up-front fees from those who can least afford them and then doing nothing meaningful.

What’s worse, the real help homeowners need from federally approved mortgage counselors is free, supported by state and federal funding.

“Some former mortgage brokers, to make up for the loss of income from selling mortgages when the market was hyperinflated, are resorting to preying on individuals facing foreclosure,” said Russell Graves, executive director of Consumer Credit and Budget Counseling in Marmora, Upper Township.

John Schmidt, vice president of housing for Tri-County Community Action Agency in Bridgeton, said he has seeing a high number of for-profit operations targeting distressed homeowners.

“When a bank files for foreclosure, that’s a public record. They have teams of people searching the records and contacting those people,” Schmidt said. “They’re charging fees of $1,500 to $3,000, and basically they don’t do anything, just gather some information.”

Graves said agencies need a debt adjuster’s license in New Jersey to work on mortgage modifications, and that’s available only to nonprofit organizations.

As a consequence, modification scam operations are usually, but not always, located out of state. Currently, ones in Maryland and New York are advertising heavily online and on radio in southern New Jersey, he said.

Graves, 52, of Upper Township, said he has called one of the services and found it is charging 1 percent of the mortgage amount, which would be about $2,500 on an average loan — ostensibly to provide a service available for free from agencies approved by the Department of Housing and Urban Development.

He said the foreclosure crisis is grim, and it is especially sad when someone in danger of losing their home comes in after wasting a large amount of money on a loan modification scam.

“One situation really bothered me. This family was losing their home and they went to a young lady who was a former mortgage broker in the state and she charged them $800 up front and after five months had done nothing,” Graves said. “By the time we got to them, they were 11 months behind on their mortgage and once they hit 12 months, they’re not eligible for the Federal Housing Agency’s Home Affordable Modification Program.”

Schmidt said one of his clients, an elderly woman, was given a refinancing mortgage with a payment of $1,200 per month, even though her income was only $900 per month.

Graves and Schmidt said their agencies have turned the names of modification scam operators over to the state Department of Banking and Insurance and the Attorney General’s Office.

Unfortunately, the state does not have the manpower to go after all of the illegitimate operations, Graves said. Many get warnings, and some are prosecuted to discourage others.

Attorneys are exempt from the requirement for a debt adjuster’s license and can work on mortgage modifications, he said, which gives some out-of-state services an opening.

Agencies fronted by lawyers, which could have one attorney and dozens of sales people, often use direct mail to solicit homeowners in foreclosure, he said.

“I contacted one, and when they found out I didn’t need a loan modification, they sold my name and number to a debt-settlement agency,” Graves said.

Even though New Jersey was only 29th among states for foreclosure filings in August, Consumer Credit and Budget Counseling is getting a few new foreclosure clients a day, he said.

The agency has about 425 active foreclosure clients in Atlantic and Cape May counties, he said, and is just one of several HUD-approved agencies in the region helping those in foreclosure for free.

The agency’s staff has gone from nine to 15 to handle the increased need for debt relief, “and will probably increase going forward,” Graves said.

The principle causes of the foreclosure crisis are well-known — a housing bubble that burst, excessively loose mortgage lending standards and a severe recession — but Schmidt said some clients he sees have helped put themselves in trouble.

“Some homeowners feel that if they pay their car loan and credit cards, it will maintain a higher credit rating, but that’s not the case,” he said. “The previous generation knew to pay the mortgage first, but somewhere that got lost in the mix.”

Those who do not pay their mortgage should be saving as much of the payment as they can afford, he said.

“Lenders really frown on going into mediation on a loan modification if the homeowner has nothing to put down on the table,” Schmidt said.

Graves said banking at least a partial mortgage payment can also pay off if foreclosure cannot be avoided.

“From the first missed payment to the time the sheriff is asking you to leave is more than 24 months right now,” he said. “For clients unable to stay in their homes, that’s good news, because if they save even half of what the mortgage payment was, they can move on with some money in their pocket and continue their lives.”

By Kevin Post, 609-272-7250,



  1. Underwater?
    Upside down?
    Need a Principal Reduction Program?
    Put the loss on your lender!
    A Short Refinance allows the homeowner to retain ownership of the property.
    Instead of the property being sold like a short sale, it is refinanced with a new lender.
    You will get all of the negative balance eliminated and a new 30 year fixed rate mortgage.
    click, or copy and past the link below for information about what is happening today, results people are getting and how to qualify.

  2. hello, this article its really nice maybe you can help me leaving comment about mine...
    you can also visit
    thank you..

  3. People need to be very wary of where they go for advice when they get into trouble paying their mortgages. Bad advice often makes the situatopn even worse and gets people to jump into something quickly when that may not actually be necessary.

  4. Thanks for your information..I am fortunate to have many clients who consider me their family lawyer. I want to be your attorney of first choice whether you need representation as a corporation, small business, or individual.Foreclosure attorney NJ

  5. Nice blog!! Thanks for sharing the informative info.
    Keep sharing the blogs.....Foreclosure lawyer NJ


I thank for the comment!