LA in the Eye of the Foreclosure Storm Print E-mail
Scam Alert
LA in the Eye of the Foreclosure Storm
(This warning and report provided to CityWatch by the LA Neighborhood Housing Services)

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It’s August 2008 and the foreclosure crisis is significantly affecting the national, state and local economic outlook.  Home loan bank giants, as well as individual homeowners, have been severely affected by what is being called “the worst financial disaster since the Great Depression.”  Foreclosures in the first two quarters of 2008 have increased 286% in comparison with the same period in 2007 in Los Angeles County.

Although 2008 is only half way over, Los Angeles County has experienced a 34% increase over the total number of foreclosures experienced in 2007.  More than $1 trillion in low-interest mortgages are scheduled to be re-set at a higher interest rate this year with re-sets occurring in June and September 2008.  We can count on the 2008 holiday season being a difficult one. 
  
The data clearly indicates that Los Angeles is in the eye of the “foreclosure storm”.  Trends illustrate that there will be a continued increase in the number of foreclosures in 2008 and perhaps in 2009.  In fact, experts in our organization, Los Angeles Neighborhood Housing Services (LA NHS), do not anticipate a respite from the crisis until 2010.

In the midst of this crisis, mortgage fraud is alarmingly common. Unfortunately, homeowners who are struggling to make their mortgage payments or anxious to sell their home are the target of scam artists.  Homeowners need to know:

  1. No one can help them with a loan modification except for their lender or servicer; and
  2. They should not pay ANYONE to help them with a loan modification. 

“Foreclosure scams may not be illegal, but they are definitely unethical,” says Ester Cadavid, Vice President & Chief Development Officer at LA NHS.  No amount of money can guarantee a successful loan modification.  There is always someone who will take a person’s money or scam them out of their property – even when a family is about to be homeless.

  • Homeowners in danger of foreclosure are extremely vulnerable.  Consumer agencies and community legal service providers want homeowners to watch out for persons or companies who may say the following:
  • We’ll stop the foreclosure process for you.  If it sounds too good to be true, it probably is. 
  • We’ll get you a new loan and solve all of your problems. This is how mortgage brokers and lenders make money.  Every time you refinance, you’ll eat away at the equity in your home, take out a larger loan and make the payments even higher. 
  • We’ll save your credit.  These scams make homeowners feel that even though they will be foreclosed on, their credit will not be damaged.  Don’t kid yourself, the foreclosure is reported against the borrower, no one else.
  • Give us some money, sign over the house, we’ll cure the debt.  In these deals, you are basically selling the equity in your home and trusting that the purchaser will make the delinquent payments.  Homeowners must be careful with these types
  • of deals because they can be scammed if the purchaser doesn’t follow through on their commitments and maintains control of all of the equity in the home.
  • We’ll buy the property, lease it to you and give you the option to buy it back. This might work, but they’ll want to sell the house back for more than what they bought it for.  Money will be lost on this deal. 
  • I’ll get your property sold quickly for top dollar. You may not get top dollar.  Always use a local agent, get three comparative market analyses and be cautious.
  • File for bankruptcy; it will solve everything. Bankruptcy does not stop foreclosure; it delays it.  Get a reputable bankruptcy attorney so that it is done correctly.  Mistakes can make things go bad quickly. 
Homeowners need to learn how to detect fraud from the onset.  Freddie Mac and Neighborhood Legal Services published the warning signs below to help homeowners identify when they may be targeted by a scam artist. 

  • Being approached by a stranger who is offering to help.
  • Receiving an unsolicited call, mail or flyer about “foreclosure help” or saving your home.
  • Being asked to assign power of attorney to a broker, consultant or other individual.
  • Participating in a complicated deal that is difficult to understand.
  • Signing documents that have blanks or false statements.  Regardless of what homeowners are told, this is never okay.

Further, NEVER SIGN A LEGAL DOCUMENT WITHOUT UNDERSTANDING ALL OF THE TERMS AND GETTING ADVICE FROM A TRUSTED PROFESSIONAL FIRST.

What should homeowners do?  The first three steps a homeowner should take when facing foreclosure are:

  1. Call your lender or servicer immediately.  Lenders want their loans to be current; they do not want foreclosed homes in their portfolio.  Now more than ever, lenders are committed to helping borrowers modify their loans and stay out of foreclosure.
  2. Create a budget that outlines ALL of your income and expenses.  Bruce Solomon, a LA NHS Senior Loan Officer, tells clients, “Your income and expenses will determine which work-out options are available to you.  If your take-home income, after paying all of your bills, leaves enough monies to pay your mortgage at a reasonable rate, then there is a very good chance of getting a loan modification.  If on the other hand, income is not sufficient to demonstrate the ability to pay regularly and over time, consider selling the property to avoid more serious credit problems.”
  3. Call a reputable agency with HUD certified counselors that can help.  There are several organizations that offer FREE foreclosure counseling.  Los Angeles Neighborhood Housing Services offers this type of counseling.  Call us today at 888-89-LANHS (52647) because nothing is worse than doing nothing.

(LA Neighborhood Housing Services is a, non-profit, affordable homeownership provider in Southern California. More on LA NHS at www.lanhs.org .)

CityWatch
Vol 6 Issue 66
Pub: August 15, 2008
 
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