Foreclosure scams continue to menace homeowners

Catherine Reagor The Arizona Republic Feb. 2, 2010 05:17 PM

Foreclosure scams that ultimately cost struggling homeowners more than a mortgage payment continue to climb in Arizona.

To combat the scams and help protect homeowners facing foreclosure, legislation has been introduced to regulate the growing number of firms offering loan modifications.

Senate Bill 1130 calls for prohibiting "foreclosure consultants" from collecting any fees until they have completed all the services they promise, with the services outlined in a signed contract. Thousands of Phoenix-area homeowners have paid home-loan modification firms upfront fees ranging from $1,000 to $4,000 and then received no help.

"Too many homeowners are just happy to have someone offer them help, so they give scam artists all their money and then receive no help and fall farther behind on their mortgage payment," said Arizona Attorney General Terry Goddard, who backs the legislation.

His office recently filed a lawsuit against Phoenix-based Asset Creation and its owner, Marvin Williamson, alleging deceptive practices in offering loan modifications. According to court documents, Asset Creation charged clients upfront fees ranging from $1,680 to $3,430 for loan modification help, and advertised it could obtain a 50 percent reduction in the homeowners' mortgage payments.

Housing advocates warn homeowners to beware of groups guaranteeing reductions in their mortgage payments through loan modifications. No one, including non-profit housing counselors, can promise a mortgage modification.

The legislation would allow Arizona prosecutors to charge foreclosure consultants "who engage in conduct that constitutes fraud or deceit against a homeowner" with a Class 1 misdemeanor charge, which comes with a fine of up to $2,500 and a jail sentence of up to six months.

Arizona homeowners can call the state's foreclosure prevention hotline, 877-448-1211, to receive free help from non-profit housing counselors, who are exempt from this legislation.

Faith-based aid

Last week, Arizona housing advocates held a forum at a Phoenix church alerting people to foreclosure scams. The event was part of a new movement to reach out to faith-based community leaders to help spread the word about loan-modification scams and where homeowners can find free help.

"People with problems often turn to their church or spiritual center first," Mark Lipton, director of the U.S. Department of Housing and Urban Development's Center for Faith Based Initiatives, told the crowd at Mountain View Lutheran Church.

"We are asking you all to tell people in your community how to avoid these foreclosure scams and where to find help."

Information was passed out with Arizona's foreclosure prevention hotline number and tips for homeowners to avoid the scams.

'Walk-in' help

Two "walk-in" clinics to help struggling homeowners are now open in Phoenix. Neighborhood Housing Services of Phoenix and Chicanos Por La Causa are partnering with government-owned mortgage giant Freddie Mac to operate what are being called Borrower Help Centers. These new centers provide free financial counseling and help negotiating a loan modification with lenders.

These walk-in centers might prove to be more accessible to some homeowners and even streamline the process for Freddie Mac borrowers, said Patricia Garcia Duarte, chief executive of Neighborhood Housing.

The Borrower Help Centers are located at 1405 E. McDowell Road and 1112 E. Washington St., Suite 102.