Video: The rise of mortgage scams

By Herb Weisbaum ConsumerMan
msnbc.com contributor
updated 9/12/2007 2:36:33 PM ET 2007-09-12T18:36:33

Kent and Kimberly Leser had a lousy weekend. They moved their three children and the last of their belongings out of their house and into the home of Kent’s parents. The Leser family lost their $135,000 house in Cookeville, Tenn., because they couldn’t make the mortgage payments and turned to the wrong people for help.

Kent, who doesn’t have health insurance, got sick last December. The hospital bill came to more than $38,000. He used the family savings to keep his commercial cleaning company going while he recuperated.

“I made good money,” Kent told me. “We just got so far behind that all the money in the world didn’t seem to help.”

The Leser’s mortgage company wouldn’t work with them, so Kent went online searching for help. He wanted to save his house, but he did not want to file bankruptcy.

In May, the Lesers signed a contract with Mortgage Assistance Solutions LLC of Clearwater, Fla., one of a growing number of companies that are profiting from the rising wave of foreclosures that has followed the housing bust.

They agreed to pay $1,300 to enroll in the company’s Fresh Start program, which promises to help homeowners who have fallen behind on their mortgage payments with "creative" solutions. Mortgage Assistance Solutions said it would take care of everything and told the Lesers not to contact the mortgage company.

Kent says he got a call from the lender in July warning him that he was about to lose his house. He called Mortgage Assistance Solutions and asked for his money back. The company  reduced the fee to $1,000 but would not refund the rest.

The Lesers complained to the Better Business Bureau. Mortgage Assistance Solutions responded by saying Kent Leser “breached his agreement” with them when he spoke to his lender.

In its response to the BBB, the company said the lender declined to offer a mortgage "workout" — a fact that was intentionally not disclosed to the Lesers.

“We had other options to look into and we were not going to cause the client undue stress by telling him the lender will not work with him," the company said in its statement.

Mortgage Assistance Solutions now has an “unsatisfactory record” with the Better Business Bureau due to a pattern of complaints and the failure to correct the underlying reason for those complaints.

Cynthia Bode, director of quality control at Mortgage Assistance Solutions, calls the 145 complaints filed with the BBB “a fraction of a percent of the clients we’ve dealt with.” She says the company responds to every complaint.

Scams on the rise 
The Better Business Bureau has received complaints from across the country about foreclosure rescue companies. A majority of the companies are located in Colorado, Georgia and Florida, states with among the highest foreclosure rates.

In most cases, the pitch starts with a letter or postcard. “Stop the sale of your home,” they say. “We will keep you in your home — GUARANTEED!”

The fee is usually about $1,200, but some victims have lost as much as $2,000.

“Unethical companies are seeing their chance to step in and make some money off of these troubled homeowners,” says Karen Nalven, president of the BBB in Clearwater. In the last 12 months her office received more than 325 complaints about these companies. The total amount of refunds requested is more than $600,000.

“Many people are losing an awful lot of money and their houses through these unethical foreclosure rescue operations,” Nalven says.

In Ohio, tens of thousands of foreclosures are under way. No surprise then that 21 new mortgage rescue services have opened there in the past year.

“Katherine” (she asked me not to use her real name) was trying to save her house in Columbus when she got a letter from Foreclosure Solutions LLC of Cincinnati.  She says they “guaranteed to help stop a foreclosure.”

Katherine was desperate, so she signed up. That was in April. She never heard from them until the beginning of August, just days before her house was set to be sold.

“It is very sad and very upsetting that they would take advantage of people like this,” she said.

Katherine was lucky — she only lost $1,150 and not her house. A friend in the real estate business was able to talk to her lender and worked out a new payment plan. Katherine tried to get her money back from Foreclosure Solutions, but they wouldn’t talk to her.

In an e-mailed response to me, Sheral Skirvin of Foreclosure Solutions wrote:

“Foreclosure Solutions LLC doesn't engage in consumer fraud.  Foreclosure Solutions LLC, in business since 2003, has helped nearly 5,000 consumers keep their homes. We are tired of being kicked around and being grouped with people who don't do their jobs. We have not been investigated."

Last month, Ohio Attorney General Marc Dann filed lawsuits against Foreclosure Solutions and five other companies he accuses of “preying on Ohioans with false promises of saving their homes.” Attorney General Dann tells me more investigations are underway.

Skirvin claims that his company has not been contacted by the Attorney General's office.

“It’s despicable,” Dann says. “Money that could be spent to hire a lawyer to help represent your interests or used to work out a deal with your mortgage company is being given to these scam artists who are cashing the check and walking away.”

Dann says his investigation found that these companies didn’t even contact the lenders foreclosing on their client’s homes.

What to do
There is no easy answer to this problem. Experts say you should take action at the first sign of financial trouble. Start by calling your lender.

“Homeowners are really much better off calling their mortgage servicing company themselves,” says Allison Brown with the Federal Trade Commission, “rather than paying a large fee to somebody who’s calling them up and offering them help.”

If that doesn’t work — and it might not — talk to a reputable, non-profit housing counselor.

Dann says anyone who uses a mortgage rescue company is almost certain to wind up in worse shape. “There is nothing a non-lawyer or non-HUD certified mortgage counselor can offer you that would improve your situation in a foreclosure that’s worth a dime,” he says.

The bottom line: Never trust anyone who contacts you, unsolicited, and who promises to help save your house from foreclosure. NEVER!

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