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Fraudulent Mortgage Relief Practices

Few things can be as devastating or life altering than receiving a foreclosure notice. In 2008 the recession brought with it an 81% increase in the rate of foreclosures. The beginning of the recession, drastically decreasing home values and increase in unemployment rates produced opportunities for several companies offering mortgage relief assistance to individuals as an alternative to the loss of a primary residence.

As with any other opportunity, offers for assistance from mortgage relief companies must always be viewed with a keen eye. In particular, certain fraudulent practices by these companies have taken advantage of homeowners in some of the most desperate circumstances. For example:

  1. Individuals posing as official mortgage counselors. Recent criminal investigations have been initiated against individuals who have gone as far as mimicking government agencies by devising similar business names in an effort to mislead debtors.
  2. Offering to perform loan audits. Some companies will call a borrower and offer to conduct a loan audit for a fee. These companies will promise to use any violations they discover during the audit as leverage to persuade the mortgage company to do a loan modification.
  3. Companies offering money back guarantees. This practice involves promising a borrower a loan modification under the Home Affordable Modification Program. Borrowers are even told to stop making payments and avoid contact with the lender. The end result often is the home winding up in default and valuable time being lost that could have used for other legitimate solutions.
  4. Mass joinder law suits. Borrowers are invited to pay a fee and become a claimant in a mortgage based law suit only to have their case dismissed as frivolous.

The above-mentioned list of mortgage relief based scams is not extensive and is only intended for the purpose of covering a common theme. Regardless of the manner in which a scam is perpetrated, there are very simple ways a home owner can prevent himself or herself from being taken advantage of:

  1. Always be suspicious of anyone who tells you to stop communicating with your lender.
  2. Never pay money up front. Some borrowers have been asked to pay as much as $5,000 up front for a loan modification, well above the cost of most attorneys fees in a chapter 7 or chapter 13 bankruptcy.
  3. Never take for granted that you are safe from a foreclosure. You are always at risk of foreclosure as long as you are receiving notices from the lender. Modification companies can be effective in delaying or preventing a foreclosure. However, the only guaranteed foreclosure prevention is the automatic stay provided during the pending bankruptcy petition.

We always encourage clients to explore every option available to them. Sometimes after a consultation the client will determine that a chapter 7 or chapter 13 bankruptcy filing is not the best course of action for them to take. Other options such as working directly with the lender or creditor can provide realistic financial solutions. However, in the event that the lender or creditor is unwilling to work with the debtor, bankruptcy protection can protect a home from foreclosure and save wages from being garnished. Contact Douglas County Bankruptcy Lawyers today for a free consultation.

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3330 Cumberland Blvd. SE, Suite 500, Atlanta, GA 30339 Phone: (770) 485-6620