The Focus of Investigation Tightens around Foreclosure Rescue Firms

New York

The federal regulators as well as those of New York are focusing their investigations on foreclosure rescue scams and tightening their noose with stricter regulations. The regulators are alleging that the troubled borrowers are not getting fast relief through refinancing or modification. Being desperate to save their homes the foreclosure victims are turning more and more to firms that promise to deliver the goods fast. Many of these are frauds.

Last April the Federal Trade Commission lashed out at the mortgage industry saying the atmosphere should be made congenial to prevent mushrooming of these mortgage relief scams. The law should step in as the targets are the vulnerable borrowers who are helpless against the sting of foreclosures.

Governor David Paterson of New York State is busy with a new bill that will expect the firms that deal with loan modification to register themselves with the state. Limits are being imposed on upfront fees and other charges. It often reaches 1% or $3,000 said Gaurav Visisht the counsel for the governor. The Banking Departments as well as the Attorney General have raised deep concerns about these activities. Rholda Ricketts of the Banking Department said, “The fees I’ve heard quoted I would say would be better served being placed toward the loan that is in distress.”

The firms promise that they will steer through government red tape, negotiate lower rates and thus prevent foreclosures. The work they are doing is fully above board. But since free help is available the borrowers need not take this route. The whole industry is being unduly painted a bad picture.

Steve Richards of ABM Mtigation of Ronkonkoma said, “There’s plenty of good business out there and there’s plenty of people who legitimately need help and the banks don’t make it easy.” Per modification his company gets $2,995.

In general the mood is against these firms and wants to do away with their advertisements making all sorts of false promises. Many firms send out letters that look as if these are direct from the bank of the borrower. They look up the foreclosure lists and target their victims. FTC chairperson Jon Leibowitz said, Scammers are taking advantage of people in a difficult situation . . .”

There are as yet no laws stipulating or putting a ceiling on how much firms can charge for helping foreclosure victims. Meghan Faux of South Brooklyn Legal Services that provides free legal help to the needy, said, “There’s no reason on earth that you would pay for a loan modification when there are free services.”