More delinquent borrowers are turning to foreclosure help hotlines earlier as proposals to boost foreclosure assistance funds grow. Even the Better Business Bureau has established help for struggling borrowers. At the same time, several companies are being accused of duping financially-strapped borrowers out of their homes.
The Ohio attorney general filed lawsuits against several companies for allegedly carrying out foreclosure rescue schemes in which they would contact troubled borrowers by phone or in person and promise to stop the foreclosure process for a fee but would instead pocket that money and leave the home to foreclosure, the state announced. Investigations revealed that lenders foreclosing on the homes were never contacted by the companies.
Referring to the practice as "predatory lending," state Attorney General Marc Dann was quoted as saying, "I can think of little that is more shameful or sleazy than attempting to profit from the misery and fear of Ohioans who face foreclosure."
The accused companies are American Housing Authority Inc., Newport Beach, Calif.; American Housing Financial Inc.; Phoenix, Ariz.; Home Restoration Services, Cleveland, Ohio; Foreclosure Assistance Solutions and Mortgage Second Chance, Clearwater, Fla.; Foreclosure Solutions LLC, Cincinnati, Ohio ; Pinnix Business Services, Shaker Heights, Ohio; and United Foreclosure Managers LLC, Youngstown, Ohio.
Evidence showed the organizations may have violated at least five different consumer laws: Consumer Sales Practices Act, Telephone Solicitation Sales Act, Home Solicitation Sales Act, Debt Adjusters Act, and the Credit Services Organization Act. Among other things, Ohio seeks to have the companies pay restitution to the affected consumers, pay a civil penalty of $25,000 per violation, and be barred from doing business until they have satisfied all monetary obligations, according to the announcement.
The Better Business Bureau has issued BBBTips for Troubled Homeowners. Sponsored by BBB member ClearPoint Financial Solutions Inc., the guide outlines options available for financially-pinched borrowers, from those awaiting a mortgage rate reset to those who may already be on the road to foreclosure.
"BBBs are assisting with an increasing number of complaints about foreclosure 'rescue' businesses that promise homeowners a fail-safe solution," the bureau said in the announcement. "Victims report unknowingly signing over the deed to their house; having to pay rent to live in their own home; or confronting a buy-back deal that exceeds the value of their home."
The guide details the reasons contributing to the current rise in foreclosures, advises borrowers on assessing their personal situation and what steps to take if they are behind on mortgage payments, and how to avoid foreclosure rescue scams and instead seek assistance from non-profit housing counselors.
The message seems to be getting across.
The Homeownership Preservation Foundation, which operates a national 24-hour help line, announced it fielded a record 30,078 calls from troubled borrowers in the second quarter -- more than doubling the volume in the first quarter and more than six fold the amount in the same period a year earlier.
The number of borrowers who received mortgage counseling reportedly shot up to over 15,000 from nearly 7,000 in the first three months of the year. Ohio had the highest number -- 3, 288 -- of borrowers receiving counseling in the second quarter, followed by California and Georgia.
The foundation said that worried borrowers are reaching out earlier -- 21 percent of callers to the 888-995-HOPE help line were less than one month behind in mortgage payments, up from 14 percent during first quarter. Half of the callers were more than two months behind, decreasing from 62 percent last quarter.
Calls triggered by problems with adjustable-rate mortgages were as likely as those by fixed-rate mortgages -- ARM borrowers made 40 percent of the second quarter's calls and fixed borrowers accounted for 39 percent, the foundation reported.
Almost half of the callers reported annual household incomes of less than $36,000 and only 11 percent reported in excess of $72,000, the foundation added.
Among states' individual efforts to help deter foreclosures is the Housing Network of Rhode Island, which through their Homeownership Connections program coordinates a "don't borrow trouble" consumer awareness campaign to combat predatory lending and manages a hotline. The network, has helped in developing some strong predatory lending/foreclosure prevention laws, also hosts a monthly or more frequent triage team where housing counselors, a lawyer, and staff from the state housing finance agency meet to review their cases and try to develop foreclosure prevention strategies, according to the National Alliance of Community Economic Development Associations.
Housing Action Illinois is joining NeighborWorks America and the HP Foundation to launch a statewide coalition of housing counseling agencies on a foreclosure relief effort. The coalition will participate in a network to receive referrals from an existing 1-800 hotline for one-on-one foreclosure intervention counseling. Participating agencies would receive $100 for each HP Foundation client referred back to the agency for in-person counseling services, and an additional compensation of $1,500 for each positive outcome, NACEDA reported.
Sen. Hillary Clinton has proposed a $1 billion fund to assist state programs in helping prevent foreclosures. States' efforts to help borrowers range from helping borrowers make a single payment to become current on their loans to helping renegotiate terms of borrowers' loans and providing financial counseling, according to the presidential candidate's Web site.
Clinton also reportedly wants to expand the mortgage-buying power of Fannie Mae and Freddie Mac to enable some borrowers to swap into less risky, lower-cost loans and make foreclosure mitigation a greater priority at the government-sponsored enterprises.
Among other initiatives, she also proposed a $1 billion fund to provide support to state, county, and municipal housing trust funds to expand affordable housing, according to the Web site.