6 Signs of a Housing Rescue Scam and Where to Get Free Help

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The mortgage crisis has created a new breed of scammer — one that charges up-front fees and tells you to lie to your lender. Need help with a mortgage problem? Here's where to turn for free, honest help.

One of the worst housing crises in our nation’s history has brought home some sobering statistics. According to real estate research firm CoreLogic, nearly one in four homeowners has a mortgage bigger than the value of their home. According to the Mortgage Bankers Association, one in eight is 90 days behind on their payments.

And while the nation’s largest lenders have lost billions to the crisis, many have proven themselves untrustworthy by using tactics like robo-signers and foreclosing on the wrong people.

So it’s no surprise that struggling homeowners are seeking help.  Although many are turning to organizations that are apparently more interested in helping themselves.

The National Fair Housing Alliance recently released a report [PDF] resulting from a year long study of 80 suspicious mortgage counseling companies that offer help to homeowners but in many cases instead deliver high fees and bad advice.

In the video below, Money Talks News CEO Stacy Johnson reveals some of what National Fair Housing Alliance found. Check it out, and then read on to learn where you can get free help with your mortgage…

As you learned from the video above, questionable mortgage assistance companies often use questionable tactics when dealing with homeowners, like:

  1. Require upfront fees to start work. According to the NFHA report, over half of the 80 companies they examined do this. Most reputable companies don’t.
  2. Guarantee a loan modification. NFHA says 43 percent do this – but how can they make any guarantee without knowing your situation? As Stacy points out in the video, nobody knows in advance what a lender is going to agree to, so anyone guaranteeing results can’t be trusted.
  3. Tell homeowners to walk away. NFHA says a quarter did this. If you can’t afford to pay, defaulting may ultimately be your only option, but it’s not one to be taken lightly.
  4. Guarantee a much lower interest rate. NFHA says 16 percent  do this, once again without knowing anything about your lender or situation.
  5. Tell homeowners to lie. NFHA says 8 percent offered this gem: Give the lender fake info! Providing false information for the purposes of a loan is illegal, and advising people to commit a crime is reprehensible.
  6. Discourage homeowners from seeking free advice. NFHA says 12 percent of the companies they examined told owners not to talk to government-approved counselors. Which is, of course, exactly what you should be doing.

Getting free help

Free mortgage help is exactly what these companies don’t want you to find – because it might put them out of business.

If you’re in over your head, visit the U.S. Department of Housing and Urban Development. There you’ll find local listings for housing counselors who can help with foreclosure, and offer advice on other housing topics like buying or renting. A HUD-approved housing counselor should always be your first stop, and it won’t cost you a dime.

Also check out the Making Home Affordable website HUD maintains, full of advice and tools to help homeowners, including a hotline where you can ask questions and get answers that fit your personal situation. The site also includes more advice on avoiding housing scams, and what to do if you are ripped off.

However, if it’s free help you’re looking for, might want to hurry. In recent legislation passed to avoid a government shutdown, $88 million of HUD funding for housing counseling was eliminated. That’s left many non-profit agencies nationwide in a budget crisis of their own, with many likely to either slash staff or charge fees.

If you’re struggling with other forms of debt, check out our stories 5 Things You Need to Know About Debt Relief Agencies and 5 Steps to a Debt Free Life.

Stacy Johnson

It's not the usual blah, blah, blah

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