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Scams, Refinancing and Tenants' Rights

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Protect yourself from foreclosure-rescue and loan-modification scams
Refinancing and New Rights for Tenants


Protect yourself from foreclosure-rescue and loan-modification scams

When you’re faced with losing your home, you may want to reach out to a company that makes promises about helping you avoid foreclosure; or modifying your loan to make payments more manageable. Ads for these companies are on radio, TV, the Internet and in your mailbox. Be advised that many businesses that heavily advertise are recent start-ups that may have little or no relevant experience. Below are tips to avoid becoming a victim of a scam:

  • Contact your lender directly before reaching out to a third party making promises.
  • Avoid businesses that guarantee favorable outcomes. There is no legitimate way to promise any particular outcome with respect to defaulted and under-water mortgages (mortgages in which the amounts owed cost more than the houses are now worth).
  • Avoid businesses that ask for up-front charges for loan modification or foreclosure rescue. This practice is specifically prohibited by Florida law.
  • Do not work with businesses that instruct you not to contact your lender, attorney or financial counselor and to make mortgage payments directly to them.
  • Avoid businesses that use names or symbols that mimic federal and state programs or falsely suggest they offer legal services or are affiliated with an attorney or law firm.
  • Before doing business with any loan modification business, check it out. Get its physical address. Ask for the names of corporate officers. Call the Attorney General’s Office (1-866-966-7226) to see if there are complaints reported against it. Ask questions and get answers. Avoid any business charging for services related to the president's Homeowner Affordability and Stability Plan. Lenders should provide this information at no cost to consumers.
  • Avoid any proposals that have you deed your home over to a company, which will then rent it back to you.
  • Avoid companies that pressure you to fill out paperwork without reading the fine print or consulting an attorney.
  • Avoid any company that asks for payment via a cashier’s check or wire transfer.
  • If any business or individual offers to help you stop foreclosure immediately by signing a document authorizing them to act on your behalf or to set up financing for you, do not sign without consulting a professional (an attorney or HUD-approved counselor). This may be a trick to get you to sign over title to your home. You are then vulnerable to losing your home and all of your equity in your home to the so called “rescuer.”

Report possible loan scam incidents
The Lawyers’ Committee for Civil Rights Under Law in partnership with Fannie Mae and Freddie Mac launched a website to educate homeowners about loan scams -- www.preventloanscams.org External Link opens in a new window -- which allows affected homeowners to report possible loan scam incidents. The reports are compiled in a national database that is made available to law enforcement agencies, to assist them in identifying loan scams and taking action against scammers.

The Federal Trade Commission
The FTC Issues Final Rule to Protect Struggling Homeowners from Mortgage Relief Scams External Link opens in a new window announced Nov. 19, 2010, by the Federal Trade Commission bans mortgage foreclosure rescue and loan modification services from collecting fees until homeowners have a written offer from their lender or servicer that they decide is acceptable. The rule is in response to bogus operations that falsely claim that, for a fee, they will negotiate with the consumer’s mortgage lender or servicer to obtain a loan modification, a short sale, or other relief from foreclosure. Many of these operations pretend to be affiliated with the government and government housing assistance programs. The new rule prohibits mortgage relief companies from making any false or misleading claims about their services, including claims about:
  • The likelihood of consumers getting the results they seek;
  • The company’s affiliation with government or private entities;
  • The consumer’s payment and other mortgage obligations;
  • The company’s refund and cancellation policies;
  • Whether the company has performed the services it promised;
  • Whether the company will provide legal representation to consumers;
  • The availability or cost of any alternative to for-profit mortgage assistance relief services;
  • The amount of money a consumer will save by using their services; or
  • The cost of the services.

In addition, the rule bars mortgage relief companies from telling consumers to stop communicating with their lenders or servicers. Companies also must have reliable evidence to back up any claims they make about the benefits, performance, or effectiveness of the services they provide.

Attorney exemption
Attorneys are generally exempt from the rule if they meet three conditions: they are engaged in the practice of law, they are licensed in the state where the consumer or the dwelling is located, and they are complying with state laws and regulations governing attorney conduct. To be exempt from the advance fee ban, attorneys must meet a fourth requirement – they must place any fees they collect in a client trust account and abide by state laws and regulations covering such accounts.

All provisions of the rule except the advance-fee ban will become effective Dec. 29. The advance-fee ban provisions will become effective Jan. 31, 2011.

The Federal Trade Commission also has an explainer on how the foreclosure rescue scams work: Mortgage Assistance Relief Scams: Another Potential Stress for Homeowners in Distress” External Link opens in a new window PDF document opens in new window


Refinancing and New Rights for Tenants

The Obama Administration has a website to assist borrowers with the Making Home Affordable Plan External Link opens in a new window. Borrowers can determine if they are eligible for the program (refinance or modification); find out who their servicers are; and locate other resources if they are not eligible for the program.

The Protecting Tenants at Foreclosure Act:
On May 20, 2009, President Obama signed into a law a bill containing provisions protecting tenants living in foreclosed buildings. The Renters in Foreclosure Toolkit External Link opens in a new window contains sample letters, questions and answers and more.

[Revised: 06-19-2013]