AG warns homeowners of mortgage loan scams - East Valley Tribune: East Valley Local News

AG warns homeowners of mortgage loan scams

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Posted: Friday, June 19, 2009 9:44 pm | Updated: 1:33 am, Sat Oct 8, 2011.

They're out there waiting to steal distressed homeowners' money while claiming to help them avoid foreclosure.

Arizona Attorney General Terry Goddard has seen a 30 to 35 percent increase this year in complaints about those offering to help with loan modifications or other foreclosure-prevention techniques. For the first time, bogus loan modifications rank among the agency's top 15 most common scams.

"We believe, unfortunately, there are an awful lot that aren't reported to our office, so it's still an imperfect measure because we can only count the ones that actually are called or written in to the AG's office," Goddard said.The most common form of loan modification scam involves people promising distressed homeowners a lower mortgage interest rate, through either a reduction in principal or a reduction in monthly payment, Goddard said.

"They do little or nothing about it, and they take an advance fee," he said. "So the homeowner is in worse shape than before and the person who's committing the crime walks away with their money, and sometimes it's a substantial amount of money."

Last month, Glendale resident Bobby John Herrera was sentenced to five years in prison as the result of a mortgage loan assistance scam that victimized 47 Valley homeowners, including many in the East Valley, according to Goddard.

"He guaranteed his victims that he was going to reduce their (mortgage interest rate)," Goddard said. "We proved that he didn't do a thing to help his victims and he charged them $1,235 each time, which in many cases was the last money they had and could have gone toward trying to get their mortgage straightened out. Hopefully that word 'guarantee' is something that warns many people that there's something being promised that can't be delivered."

Larry Bush, regional spokesman for the U.S. Department of Housing and Urban Development, said his agency is well aware of the growing prevalence of these scams.

"We are concerned because homeowners are vulnerable," he said. "We are seeing far too many cases of people being taken advantage of, and losing thousands of dollars and then not getting any help. If it sounds too good to be true, it is, and if they contacted you instead of you contacting them, be very wary."

Legitimate, local housing counselors are available to help distressed homeowners free of charge, Bush said.

"If they are in trouble, they should explain that there's an urgency to it, like they have a foreclosure notice ... and they can often be given an appointment out of sequence in order to meet their urgent need," Bush said. "Housing counseling agencies have the ability to call the lender on their behalf and discuss the loan with them if you authorize them to do that."

Goddard recommends that homeowners who are facing foreclosure seek assistance directly from their mortgage lender or servicer, or government-certified housing counselor.

"The best thing you can do if you're in trouble with your mortgage or you're behind and need help is to talk to your lender," he said. "There's a misconception that you have to have an advocate, that you have to have somebody else approach the lender on your behalf, and that's just not true. I know a lot of people have gone to these scam artists because they believed that they needed an advocate."

HUD recommends troubled homeowners do seek the help of local housing counselors because they can help clear the confusion that can result from dealing directly with lenders, Bush said.

"Sometimes the lender will have sold the loan to someone else and they don't have the authorization to make the modification," he said.

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