CA 2008-1 Cnsumer Advisry Cmptrller f the Currency Administratr f Natinal Banks Washingtn, DC 20219 May 16, 2008 (Superseded by CA 2009-1 n April 21, 2009) OCC Cnsumer Tips fr Aviding Mrtgage Mdificatin Scams and Freclsure Rescue Scams Scams that prmise t rescue yu frm freclsure are ppping up at an alarming rate natinwide, and yu need t prtect yurself and yur hme. If yu re falling behind n yur mrtgage, thers may knw it, t including cn artists and scam artists. They knw that peple in these situatins are vulnerable and ften desperate. Ptential victims are easy t find: mrtgage lenders publish ntices befre freclsing n hmes. Private firms frequently cmpile and sell lists f these freclsed prperties and distressed brrwers. After reading these ntices, cn artists apprach their targets in persn, by mail, ver the telephne, r by e-mail. They ften advertise their services n televisin, radi, r the Web, and in newspapers, describing themselves as freclsure cnsultants r mrtgage cnsultants, ffering freclsure preventin r freclsure rescue services. And they are nly t happy t take advantage f hmewners wh want t save their hmes. If smene ffers t negtiate a lan mdificatin fr yu r t stp r delay freclsure fr a fee, carefully check his r her credentials, reputatin, and experience, watch ut fr warning signs f a scam, and always maintain persnal cntact with yur lender and mrtgage servicer. Yur mrtgage lender can help yu find real ptins t avid freclsure. It is imprtant t cntact yur mrtgage lender early t preserve all yur ptins. There are legitimate cnsumer financial cunseling agencies that can help yu wrk with yur lender. This Cnsumer Advisry, issued by the Office f the Cmptrller f the Currency (OCC), describes cmmn scams, suggests ways t prtect yurself, prvides infrmatin n U.S. gvernment lan prgrams and cunseling resurces, and lists 10 warning signs f a mrtgage mdificatin scam. Cmmn Types f Scams Here are sme examples f scams related t mrtgage mdificatin and freclsure avidance.
Freclsure rescue and refinance fraud. The scam artist ffers t act as an intermediary between yu and yur lender t negtiate a repayment plan r lan mdificatin and may even guarantee t save yur hme frm freclsure. Yu may be tld t make mrtgage payments t the scammer directly alng with significant, up-frnt fees and be tld that the scammer will frward the payments t yur lender. In reality, the scammer may pcket yur mney and leave yu in wrse shape n yur lan. The scam artist als may tell yu t stp making payments r stp cmmunicating with yur lender. Dn t fllw that advice. Remember that yur mrtgage lender shuld be the starting pint fr finding ptins t avid freclsure. Yu als shuld cnsider cntacting qualified and apprved credit cunselrs. Fake gvernment mdificatin prgrams. Unscrupulus peple may claim t be affiliated with, r apprved by, the gvernment r may ask yu t pay high up-frnt fees t qualify fr gvernment mrtgage mdificatin prgrams. While gvernment-supprted mrtgage mdificatin and refinancing initiatives are legitimate, the scam artists claims are nt. Keep in mind that yu d nt have t pay t benefit frm these gvernment prgrams. All yu need t d is cntact yur lender r lan servicer. The scam artist s name r Web site may be very similar t thse f gvernment agencies. The scam artist may use such terms as federal, TARP, r ther wrds r acrnyms related t fficial U.S. gvernment prgrams. These tactics are designed t fl yu int thinking the scam artist is smehw apprved by, r affiliated with, the gvernment. The gvernment is taking actins t stp this fraud, but yu als need t prtect yurself. S be wary f claims ffering gvernment-apprved r fficial gvernment lan mdificatins. Yur lender will be able t tell yu whether yu qualify fr any gvernment initiatives t prevent freclsure. Yu d nt have t pay anyne t benefit frm them. Leaseback/rent-t-buy schemes. In this type f scam, yu are asked t transfer the title t yur hme t the scammer, wh will, suppsedly, btain new and better financing and/r allw yu t remain in the hme as a renter and eventually buy it back. If yu d nt cmply with the terms f the rentt-buy agreement, yu will lse yur mney and face evictin. The agreement may be very hard t cmply with, because it may require, fr instance, high up-frnt and mnthly payments that yu may nt be able t affrd. In fact, the scammers may have n intentin f ever selling the hme back t yu. They simply want yur hme and yur mney. Remember that transferring yur title des nt change yur payment bligatins yu will still we yur mrtgage debt. The difference will be that yu will n lnger wn yur hme. If payments are nt made n the mrtgage, yur lender has the right t freclse, and the freclsure and any ther prblems will appear n yur credit reprt.
Bankruptcy scams. Yu may have heard that filing bankruptcy will stp a freclsure. This is true but nly temprarily. Filing bankruptcy brings an autmatic stay int effect that stps any cllectin and freclsure while the bankruptcy curt administers the case. Eventually, yu must start paying yur mrtgage lender, r the lender will be able t freclse. Bankruptcy is rarely, if ever, a permanent slutin t prevent freclsure. In additin, bankruptcy will negatively impact yur credit scre and will remain n yur credit reprt fr 10 years. Debt-eliminatin schemes. Scammers may claim t be able t eliminate yur debt by making illegitimate legal arguments that yu are nt bligated t pay back yur mrtgage. These scammers will prvide yu with inaccurate claims abut applicable laws and finance, such as that secret laws can be used t eliminate debt r that banks d nt have the authrity t lend mney. D nt stp making payments n yur mrtgage based n their claims. Hw t Prtect Yurself frm Mrtgage Mdificatin and Freclsure Avidance Scams Always prceed with cautin when dealing with anyne ffering t help yu mdify yur mrtgage r avid freclsure. Remember that yu d nt need a third party t wrk with yur lender any such party shuld make the prcess easier, nt harder and mre expensive. Cntact yur lender r mrtgage servicer first. Speak with smene in the lss mitigatin department fr mrtgage mdificatin ptins and ther alternatives t freclsure. Make all mrtgage payments directly t yur lender r t the mrtgage servicer. D nt trust anyne t make mrtgage payments fr yu, and d nt stp making yur payments. Avid paying up-frnt fees. While sme legitimate husing cunselrs will charge small fees fr their services, d nt pay fees t anyne befre receiving any services. Make sure yu are dealing with a legitimate rganizatin. Knw what yu are signing. Read and understand every dcument yu sign. D nt rely n an ral explanatin f a dcument yu are signing make sure that yu read and understand what the dcument actually says. Otherwise, a dcument may bligate yu t terms yu dn t want r may even cnvey wnership f yur hme t smene else. Never sign dcuments with blank spaces that can be filled in later. Never sign a dcument that cntains errrs r false statements, even if smene prmises t crrect them. If a dcument is t cmplex t understand, seek advice frm a lawyer yu trust r a legitimate, trusted financial cunselr.
D nt sign ver yur deed withut cnsulting a lawyer yu select. Freclsure scams ften invlve transfer f wnership f yur hme t a cn artist r anther third party. Never agree t this withut getting the advice f yur wn lawyer, financial advisr, credit cunselr, r ther independent persn yu knw yu can trust. By signing ver yur deed, yu lse the rights t yur hme and any equity built up in the hme and yu are still bligated t pay the mrtgage. Get prmises in writing. Oral prmises and agreements relating t yur hme are usually nt legally binding. Prtect yur rights with a written dcument r cntract signed by the persn making the prmise. Keep cpies f all cntracts that yu sign. Again, never sign anything yu dn t understand. Reprt suspicius activity t relevant federal agencies, such as the Federal Trade Cmmissin, and t yur state and lcal cnsumer prtectin agencies. Reprting cn artists and suspicius schemes helps prevent thers frm becming victims. If yur cmplaint r questin invlves a natinal bank and yu cannt reslve it directly with the bank, cntact the OCC s Custmer Assistance Grup by calling (800) 613-6743, by sending an e-mail t custmer.assistance@cc.treas.gv, r by visiting www.helpwithmybank.gv. Cntact a legitimate husing r financial cunselr t help yu wrk thrugh yur prblems. T find a cunselr, cntact the U.S. Department f Husing and Urban Develpment (HUD) at (800) 569-4287 r (877) 483-1515, r g t www.hud.gv/ffices/hsg/sfh/hcc/hccprf14.cfm. Call (888) 995-HOPE, the Hmewner s HOPE Htline t reach a nnprfit, HUD-apprved cunselr thrugh HOPE NOW, a cperative effrt f mrtgage cunselrs and lenders t assist hmewners. Visit NeighbrWrks America s Web site at: www.nw.rg/netwrk/hme.asp Visit the fllwing Web sites fr further infrmatin: The OCC s cnsumer infrmatin site fr banking-related questins: www.helpwithmybank.gv OCC Custmer Assistance Grup and cnsumer assistance site: www.cc.gv/custmer.htm Federal Trade Cmmissin: www.ftc.gv/bcp/edu/pubs/cnsumer/hmes/rea04.shtm
Federal Reserve Bard: http://www.federalreserve.gv/pubs/freclsurescamtips/default.htm NeighbrWrks America: www.nw.rg HOPE NOW: www.hpenw.cm Apply fr a gvernment-spnsred lan mdificatin r refinancing. The U.S. gvernment has develped a majr lan mdificatin and refinancing prgram t help hmewners find affrdable lans and t save their hmes. G t this Web site fr infrmatin n these federal mrtgage mdificatin and refinancing prgrams: www.makinghmeaffrdable.gv Ten Warning Signs f a Mrtgage Mdificatin Scam 1. Pay us $1,000, and we ll save yur hme. Sme legitimate husing cunselrs may charge small fees, but fees that amunt t thusands f dllars are likely a sign f ptential fraud especially if they are charged up-frnt, befre the cunselr has dne any wrk fr yu. Be wary f cmpanies that require yu t prvide a cashier s check r wire transfer befre they take any actin n yur behalf. 2. I guarantee I will save yur hme trust me. Beware f guarantees that a persn r cmpany can stp freclsure and allw yu t remain in yur huse. Unrealistic prmises are a sign that the persn making them will nt cnsider yur particular circumstances and is unlikely t prvide services that will actually help yu. 3. Sign ver yur hme, and we ll let yu stay in it. Be very suspicius if smene ffers t pay yur mrtgage and rent yur hme back t yu in exchange fr transferring title t yur hme. Signing ver the deed t anther persn gives that persn the pwer t evict yu, raise yur rent, r sell the huse. Althugh yu will n lnger wn yur hme, yu still will be legally respnsible fr paying the mrtgage n it. 4. Stp paying yur mrtgage. D nt trust anyne wh tells yu t stp making payments t yur lender and servicer, even if that persn says it will be dne fr yu.
5. If yur lender calls, dn t talk t them. Yur lender shuld be yur first pint f cntact fr negtiating a repayment plan, mdificatin, r shrt sale. It is vital t yur interests t stay in clse cmmunicatin with yur lender and servicer, s they understand yur circumstances. 6. Yur lender never had the legal authrity t make a lan. D nt listen t anyne wh claims that secret laws r secret infrmatin will be used t eliminate yur debt and have yur mrtgage cntract declared invalid. These scammers use sham legal arguments t claim that yu are nt bligated t pay yur mrtgage. These arguments dn t wrk. 7. Just sign this nw; we ll fill in the blanks later. Take the time t read and understand anything yu sign. Never let anyne else fill ut paperwrk fr yu. Dn t let anyne pressure yu int signing anything that yu dn t agree with r understand. 8. Call 1-800-Fed-Lan. This may be a scam. Sme cmpanies trick brrwers int believing that they are affiliated with r are apprved by the gvernment r tell yu that yu must pay them high fees t qualify fr gvernment lan mdificatin prgrams. Keep in mind that yu d nt have t pay t participate in legitimate gvernment prgrams. All yu need t d is cntact yur lender t find ut if yu qualify. 9. File fr bankruptcy and keep yur hme. Filing bankruptcy nly temprarily stps freclsure. If yur mrtgage payments are nt made, the bankruptcy curt will eventually allw yur lender t freclse n yur hme. Be aware that sme scammers will file bankruptcy in yur name, withut yur knwledge, t temprarily stp freclsure and make it seem as thugh they have negtiated a new payment agreement with yur lender. 10. Why haven t yu replied t ur ffer? D yu want t live n the streets? High-pressure tactics signal truble. If smene cntinually cntacts yu and pressures yu t wrk with them t stp freclsure, d nt wrk with that persn. Legitimate husing cunselrs d nt cnduct business that way.