BY Susan Calistri for Lawyers.com
President Obama's "Making Home Affordable" bill now allows many Americans to keep their homes. This $75 billion stimulus-refinancing plan can help you and an estimated nine million other homeowners refinance their home mortgages. The plan's 2% fixed interest rate and incentives help banks to loosen credit to help homeowners in need. You could save hundreds or thousands of dollars every year. If you've missed mortgage payments, or are facing foreclosure, this would help you the most.
As always, there's no shortage of people willing to take advantage of people in need for their own gain - this is no different. These scams are called "refinancing scams" or "loan modification fraud." The actual scam varies, but pretty much results in the scammer pocketing cash or assets at your expense. Scammers are more likely to target you if you're already facing the loss of your home.
How the Scam Works
In the refinancing scam, the scam company or individual sends a mailer or calls you. The scammer offers to help refinance at the new, lower interest rate. Most of the homeowners targeted are having difficulty paying their mortgages. In some cases, you may have a high-interest mortgage, and are looking to benefit from the low interest rate to save money.
Or, you may have a balloon mortgage, where the payments have increased dramatically over a short period. Either way, you're desperate to save your home, and may even be facing the possibility of foreclosure.
There are some "red flags" that may indicate a refinance scam:
- The scam company seeks an upfront fee, before services are provided. The fee may cover "refinance counseling" or a "refinance consultation" or may be the company's fee for refinancing. It may be hundreds or even thousands of dollars. The company may do very little or nothing, keeping the fee but not refinancing your home.
- The company doesn't disclose its fees and rates up front. Under the stimulus plan, the interest rate is guaranteed and the law requires lenders to disclose the interest rate, their fees, and any costs. A company promotes the 2% interest rate up front, and then, at closing, raises that rate. In addition, "extra" fees and costs not originally quoted should be a red flag. Seek out companies who work within the new laws.
- The company asks you to sign over your title for a period of time or the company acts as a "middle man." You send payments to the company and the company "sends payments" to the previous lender. These companies are attempting to "equity-skim." In reality, your lender doesn't get paid at all
President Obama's "Making Home Affordable" Plan
The stimulus refinancing bill doesn't make you pay an up-front fee before services are provided. In fact, legitimate lenders will not charge an up-front fee for refinancing under the plan (though some may charge a fee for their services). A list of all fees is provided at the beginning of the services.
Legitimate lenders won't need you to sign over your title for any period of time nor will they ask to make the payments on your behalf. Be aware of these arrangements. These scams may cost you hundreds or thousands of dollars, put you further into debt, or cause you to lose the title to your home altogether and lose your house for good.
What You Can Do
If you're contacted by a company you believe is trying to scam you, turn over the scam information to your state Attorney General. The Attorney General's office can then investigate the company. Such an investigation may protect other homeowners like yourself.
To refinance your mortgage following the stimulus package rules, discuss it with your current lender. Your lender may be able to assist with refinancing under the new plan. The "Making Home Affordable Web site also has refinancing information, counseling and options about where to go if you need more help.
Questions for Your Attorney
- Can you review my situation and help me decide which refinancing product to use? Can you review the documents and handle the closing of the loan?
- How can I tell if a mailing offering refinancing is legitimate?
- Are the terms and features of refinance loans regulated under the Making Home Affordable plans? What kinds of costs and information should I expect from a lender?