Look before leaping to protect against mortgage scams

The following editorial appeared in the June 30, 2010 Pioneer Press:

Look before leaping to protect against mortgage scams

Homeowners struggling with the loss of a job, a soaring mortgage payment, declining home value — or all of the above — are at risk for foreclosure. The nation, the state and our community haven't seen this kind of housing stress since the 1930s. Not every mortgage can be 'fixed' short of losing the home. But some can.

In times of financial trial, it's important to know who is trying to help and who is trying to unethically profit from homeowners' misery. "Look before you leap" is good advice in any financial transaction but it is especially pertinent in these times. It is the slogan of a public campaign from those who want to help stressed homeowners, aimed at protecting homeowners from those who want to rip them off.

The Minnesota Home Ownership Center, a nonprofit group that focuses on educating homeowners and counseling those facing foreclosure, is leading the campaign. It is aimed at the booming business of foreclosure "prevention" and loan-modification come-ons that are either full-fledged scams or outfits that charge for services that are widely available for free.

Consider that in 2008, the Federal Trade Commission received one complaint of foreclosure scams. Last year, it received more than 8,000. According to Julie Gugin, executive director of the Minnesota Home Ownership Center, these companies, often with impressive-sounding names, target troubled homeowners through direct mail, Internet pitches and phone calls. She said immigrant communities, where English skills and legal knowledge may be limited, have been "particularly hard hit.''

Gugin said these firms often tailor their pitch to mimic legitimate government programs, creating confusion in the consumer's mind. Tactics include collecting up-front fees, promising outcomes that are never delivered, and even convincing homeowners to sign over their deeds or to accept questionable "reverse mortgage" loans with ballooning fees.

In March, Minnesota Attorney General Lori Swanson filed suit against three out-of-state loan-modification companies, saying they violated a 2009 state law preventing these companies from charging fees before delivering the promised services. Because services to distressed homeowners are offered for free, a request for payment by a loan-modification company should be a red flag to consumers, indicating trouble ahead.

Among the many institutions supporting the "Look Before You Leap" campaign are: TCF Bank and US Bank, the Federal Reserve Bank of Minneapolis, the Minnesota Department of Commerce, the Hmong American Partnership and the Minnesota Association of Realtors. Our community has an interest in preventing foreclosures, and loan-modification scams work against that goal.

We encourage regulators and consumers to be on the lookout for scams in a time of crisis. We encourage consumers to be wary, especially when they are in desperate straits and, therefore, most vulnerable. There is a great difference between a come-on and legitimate counseling. We support "Look Before You Leap" as an effort to pound home the time-honored truism of being very careful before signing up or paying out, especially during hard times.

Those facing the possibility of foreclosure, either now or in the future, can contact the Minnesota Home Ownership Center for a referral to free counseling services. The numbers are 651-659-9336 and 1-866-462-6466 toll-free. (Hit 4 to go to the mortgage assistance line.) Further information is available at www.lookbeforeyouleap.org