TIPS to Avoid Foreclosure:

 Having trouble paying your mortgage? Help is just a phone call away.Tips to Avoid Foreclosure 

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 Hundreds of thousands of families behind on their mortgage could avoid foreclosure by acting quickly and reaching out to their lender or a reputable nonprofit. Here are some tips to keep in mind.
How should I avoid mortgage trouble?Prioritize your expenses. Prioritize your bills and pay the ones that are most necessary for the well-being of you and your family, such as shelter, food, and utilities.Protect your credit score. When you are experiencing a financial challenge, remember that making late payments or skipping them can seriously affect your credit score.Beware of scams. Beware of predatory lenders, pre-approved loan offers, and phony counseling agencies. Homeowners facing financial troubles are especially vulnerable because they are desperate to find a solution to their problems. Legitimate counseling agencies will offer their programs for free or for a small administrative charge. Check with a lawyer or your mortgage company before signing anything involving your home. Do not sign anything you do not understand. The U.S. Department of Housing and Urban Development has more information about avoiding predatory lending on their website, should I do if I miss a mortgage payment?

Call for help—it’s the most important thing you can do. More than half of homeowners facing foreclosure did not call for help when they fell behind in their mortgage payments.

Don’t make a bad situation worse. Ignoring your situation won’t make it go away. Take the steps provided in this sheet to protect your home, your family, and your credit rating.

Notify the bank as soon as you know your payment will be late. Calling when you are 30 or 60 days late is better than calling when you are 120 days late. You still have some options. You must put your pride on hold if you’re truly serious about stopping the foreclosure process. Remember that foreclosure is not in the best interest of lenders—lenders report that it costs up to $50,000 or almost half the loan balance each time they write off a foreclosure.

Work it out. Depending on the situation, the lender may lower the interest rate, lower the borrower’s monthly payment, or enter into a repayment agreement for missed payments.

Avoid foreclosure rescue scams by calling a reputable nonprofit organization. The Homeowner’s HOPE Hotline, available at, (888) 888-995-HOPE, is an independent, third-party resource that is part of a HUD-certified, not-for-profit network dedicated to helping homeowners. HOPE counselors are trained to set up a plan of action designed just for you and your situation. (Spanish speaking counselors are also available; llame español.) When you call HOPE for Homeowners, you won’t be judged, you won’t pay a dime, and most of all, you won’t be disappointed.

What are my options if I cannot make payments?

Forbearance. You are allowed to delay payments for a short period, with the understanding that another option will be used afterwards to bring the account current.

Reinstatement. When you are behind in your payments but can promise a lump sum to bring payments current by a specific date.

A Repayment Plan. If your account is past due, but you can now make payments, the lender may agree to let you catch up by adding a portion of the past due amount to each current monthly payment until your account is current.

Modifying Your Mortgage. The lender can modify your mortgage to extend the length of your loan (or take other steps to reduce your payments). One solution is to add the past due amount into your existing loan, financing it over a long term.

Selling Your Home. If catching up on payments is not possible, the lender might agree to put foreclosure on hold to give you some time to attempt to sell your home.

Property Give-Back. The lender can allow you to give-back your property – and then forgive the debt. Give-backs do, however, have a negative impact on your credit record, although not as much as a foreclosure. The lender might require that you attempt to sell the house for a specific time period before agreeing to this option, and it might not be possible if there are other liens against the home.

How can I reduce the risk of foreclosure when I purchase or refinance my home?

Take advantage of prepurchase counseling offered by not-for-profit organizations. Homeowners can avoid trouble later on by making informed decisions while purchasing their homes. Borrowers who are most likely to keep their homes understand their mortgage options and how much they can really afford. Education also helps borrowers identify and avoid unscrupulous sellers or lenders. A recent study found that borrowers who received counseling have half the default risk as those who did not.

Avoid prepayment penalties and balloon payments. People who refinance their mortgages with loans containing prepayment penalties or balloon payments are more likely to undergo foreclosure, according to a study by researchers at the University of North Carolina. According to the study, a prepayment penalty increases foreclosure risk by about 20 percent. Mortgages with balloon payments were 46 percent more likely to go to foreclosure than loans without. Protect the equity in your home – it’s a valuable source of wealth that will build over time.

Stay on top of home repairs and maintenance. NeighborWorks® organizations provide counseling in home maintenance and repairs and rehabs that improve the value of a home. Too often emergency repairs and less-than-trustworthy contractors push a homeowner into foreclosure.



Are Foreclosure Auctions Legal?

Lawsuit: Foreclosure Auction Ads, Actions Illegal

Just when you thought problematic real estate sales were slowing down and their aftermath (including foreclosures, bankruptcy filings, etc.) was picking up, a new lawsuit regarding foreclosure auctions has cropped up.

According to the Inman News, a lawsuit was filed with the California Superior Court this month on behalf of three people who attended a foreclosure real estate auction in the southern part of the state. One of the three is reportedly a real estate broker for RE/MAX.

Sources indicate that the suit claims deceptive advertising strategies on the part of those promoting real estate auctions and actions during real estate closings that violate federal regulatory laws. Because the lawyers in charge are reportedly seeking class action status for the suit, tens of thousands of people could be affected.

It seems that one lawyer involved has noted that, if the suit is granted class action status by the court, three groups of people could be affected: those who attended foreclosure auctions, those who entered a winning bid but did not ultimately buy the property and those who entered a winning bid and did follow through with the purchase.

The lawsuit evidently focuses on what happens after someone enters a winning bid at a foreclosure auction (where a property in foreclosure is bid on by potential buyers).

Apparently, even after an auctioneer yells “sold,” winning bidders may not end up purchasing the property in question. Property sellers or lenders can, in most cases, accept or reject a bidder’s offer after the auction is over, according to reports.

Many real estate auctions are called “reserve auctions,” because properties for sale have “reserve prices” that must be reached in order for a property to actually be sold. This price, it seems, is rarely mentioned during the auction itself, which can lead a bidder to believe he or she has purchased a house for a set amount, when in fact the details may not be finalized.

This reportedly happened to one of the plaintiffs in the suit, who won an auction by offering $153,000 on a property and was told at signing that she would have to fork over an additional $50,000 if she wanted to own the home.

The lawsuit also alleges that many auction companies require buyers to use their settlement service providers when signing the paperwork, and during the final transaction require buyers to pay for sales costs – including commissions! And some of these fees, according to the suit, violate state regulations.

The defendants listed include Countrywide Home Loans Inc., GMAC Mortgage LLC, auction companies, and title and escrow companies.

It seems that even the current economic upheaval caused by deceptive mortgage lending and real estate practices is not enough to deter some from fraudulent and illegal behavior.

What Happens to Car If You File Bankruptcy?

What happens to my car if I file bankruptcy?

There are several issues to consider in answering this question. The most important issue is the value of your car. In most cases, you can protect your car using the allowable bankruptcy code exemptions. An exemption allows you to file for bankruptcy relief and protect some of your property. The bankruptcy courts understand you need a car to get to work and to pick your kids up from school. So long as you aren’t driving an antique classic car, you will likely be able to keep your car.

Many states allow debtors to elect the bankruptcy code exemptions. In those states, debtors get their choice between the federal exemptions and those in the law of their state. For the balance of the states, only the state exemptions can be selected. The exemption laws vary greatly from state to state. You need to consult a seasoned bankruptcy lawyer for the list of exemptions available to you.

The next question is whether you have clear title to your car. If you have pledged your vehicle as security for a debt, or if you are financing or leasing a vehicle, you have three options for secured car loans when you file Chapter 7 bankruptcy.

Car Loans in Chapter 7 Bankruptcy

Reaffirm: A reaffirmation agreement is a contract between you and the car creditor in which you agree to pay the balance owed on your car note, despite the bankruptcy filing. You continue to make payments, and the creditor promises that, as long as payments are made, the creditor will not repossess or take back the property.

Reaffirmed debts are not discharged, and the debt survives the bankruptcy. If you do not make your car payments after you reaffirm the car loan, the car lender can repossess the car and sue you for the deficiency balance. After the finance company repossesses the car, they will sell the car at the auto auction. Usually the finance company does not get enough money from the auction to pay off your loan. This shortfall is called a “deficiency,” and you would still be legally obligated to pay the creditor the deficiency balance. As you can see, the decision to reaffirm your car loan is a serious financial matter.

Reaffirmation agreements are strictly voluntary. You are not required by the Bankruptcy Code or other state or federal law to reaffirm your car loan. Before entering into such an agreement, you will want to speak to a bankruptcy attorney to make sure that the reaffirmation is in your best interest.

Redeem: In Chapter 7, you have the right to purchase or redeem your car from the creditor by making a lump sum payment equal to the car’s fair market value. The 2005 bankruptcy code provides that you must pay the creditor the replacement retail cost of the car. The balance of the debt will be discharged. For example, assume you own a car worth $5000.00, but owe the finance company $10,000.00. In this circumstance, you could redeem the vehicle by paying the creditor $5000.00, and the remaining balance will be discharged in your bankruptcy. In Nevada, the car value from exemption is $15,000.

Surrender: If you cannot afford the monthly payments on your car loan, or if you determine that you owe more than the car is worth, you can unload the car and the debt in your Chapter 7 bankruptcy by surrendering the vehicle to the creditor.

Car Leases in Chapter 7 Bankruptcy

If you are leasing your car when you file Chapter 7 bankruptcy, you can choose to either continue making the monthly lease payments, or surrender the car back to the creditor. If you surrender the leased car, any obligation under the lease will be eliminated in your Chapter 7 bankruptcy case.

Car Loans in Chapter 13 Bankruptcy

Chapter 13 bankruptcy is powerful tool to protect your car from repossession. If you have fallen behind on your car payments, you can file a Chapter 13 bankruptcy to stop the repossession of your vehicle. The amount you have to pay for your car depends upon when you bought your car.

910 Claims: If you bought your vehicle within 910 days of filing your bankruptcy case, you must repay the entire car loan. The good news is that the interest rate you pay on your car loan may be significantly reduced. For example, if you owed $10,000 on a car loan whose blue book value was only $5000, you would be required to pay the entire $10,000 balance if the car was purchased less than 30 months, or 910 days, of filing. In short, debtors who want to keep their cars must pay the full loan amount rather than “cram down” the debt to the value of the car.

Cram Down: If you bought your car more than 910 days before you file bankruptcy, you will only have to repay an amount equal to the present value of the car. For example, if you owed $5000 on a car that is worth only $2500, upon filing Chapter 13 you would be required to repay the finance company only $2500 over the three to five year term of your Chapter 13 repayment plan.

Car Leases in Chapter 13 Bankruptcy

You car lease cannot be paid through the Chapter 13 bankruptcy repayment plan that you devise with your bankruptcy attorney. You can “assume” the lease and continue making the monthly payments. You can “reject” the lease and return the car to the creditor. The creditor will sell the leased vehicle, apply the sale proceeds to your lease balance and then file a claim in your Chapter 13 bankruptcy case for the lease deficiency. This deficiency is an unsecured, non-priority claim, which means you will likely only pay that creditor pennies on the dollar.

Foreclosure Rescue Scams Spreading Across America

Foreclosure Rescue Scams Mounting Along with Foreclosure Rates

can be traumatic, and unfortunately people in difficult circumstances make easy prey for the unscrupulous. As foreclosure rates climb across the country and more and more homeowners find themselves at risk of losing their homes, predators are springing up nearly as quickly to profit from their distress.

Homeowners desperate to stop foreclosure may put their trust in the wrong people, and in doing so may lose more than they’d ever expected. Several states have taken action against predatory “mortgage rescue” companies and individuals claiming to offer services to stop foreclosure over the past two years.

Foreclosure rescue scams take many forms, but here are a few examples of operations shut down, sued, or otherwise sanctioned by some states-they’re representative of some of the most common foreclosure rescue scams:
  • Illinois regulators shut down a mortgage rescue scam in which investors would persuade homeowners to sign over the deeds to their homes and any earned equity. Homeowners were told that the investors would pay off the delinquency, lease the property back to the homeowner, and eventually sell it back to them.
  • In North Carolina, a company searched courthouse records for people facing foreclosure, then sent direct mail solicitations claiming special expertise and a high rate of success in stopping foreclosure. Homeowners paid a fee up front, usually one month’s mortgage payment, and then many never heard from the company again. In addition to losing the money paid to the company, many of these homeowners lost the opportunity to negotiate with their mortgage lenders or seek other solutions because the company instructed homeowners to have no direct contact with their lenders.
  • Three Washington state businesses allegedly targeted consumers who had fallen behind on their property taxes, taking title to their homes in return for very small payments. The companies then let the properties go to tax sales and collected for themselves the surplus equity that would otherwise have gone to the homeowners.
  • The Texas Attorney General won a restraining order and order freezing assets against a woman who allegedly told homeowners that she would negotiate with their mortgage companies to resolve past-due payments and stop foreclosure. Bobbie Heckard then reportedly gave homeowners forms she said would allow her to negotiate on their behalves, but which actually deeded their property over to her.

Although these are some of the most common foreclosure rescue scams at the moment, there are as many means of deception as there are people in difficult circumstances. If you’re looking to stop foreclosure, don’t let desperation push you into uninformed or hasty decisions. In particular, beware of any company that instructs you not to talk to your mortgage lender, or who makes promises (such as, “We’ll sell the house back to you at a later date.”) that aren’t part of a written agreement. Make sure that you read and understand everything that you sign, and if you don’t understand, have someone you trust or a local attorney review the document before you sign. If the person or company you’re dealing with does not want you to have the paperwork reviewed by an outside party or discourages talking to an attorney, that should be a red flag that they may have something to hide.

There are a variety of options available to stop foreclosure, depending upon the specifics of your situation. For people with significant equity in their homes who are not more than 90 days past due, refinancing is often a viable alternative to stop foreclosure. For those who can’t refinance, a debt workout plan may be the answer. And even if negotiations and refinancing don’t work out for a homeowner, Chapter 13 bankruptcy may stop foreclosure.

Whatever your specific circumstances, do your homework. Make sure that you’re dealing with a reputable company or attorney, that you have read and understood everything that you sign, and that you aren’t relying on verbal promises that may not be enforceable.

How to Stop a Foreclosure?


Foreclosure may occur. This is the legal means that your lender can use to repossess (take over) your home. When this happens, you must move out of your house. If your property is worth less than the total amount you owe on your mortgage loan, a deficiency judgment could be pursued. If  that happens, you not only lose your home, you also would owe HUD an additional amount. Both foreclosures and deficiency judgments could seriously affect your ability to qualify for credit in the future. So you should avoid foreclosure if possible.



1. DO NOT IGNORE THE LETTERS FROM YOUR LENDER. If you are having problems making your payments, call or write to your lender’s Loss Mitigation Department without delay. Explain your situation. Be prepared to provide them with financial information, such as your monthly income and expenses. Without this information, they may not be able to help.


2. Stay in your home for now. You may not qualify for assistance if you abandon your property.


3. Contact a HUD-approved housing counseling agency. Call 1-800-569-4287 or TDD 1-800-877-8339 for the housing counseling agency nearest you. These agencies are valuable resources. They frequently have information on services and programs offered by Government agencies as

well as private and community organizations that could help you. The housing counseling agency may also offer credit counseling. These services are usually free of charge.



You may be considered for the following:

Special Forbearance.Your lender may be able to arrange a repayment plan based on your financial situation and may even provide for a temporary reduction or suspension of your payments. You may qualify for this if you have recently experienced a reduction in income or an increase in living expenses. You must furnish information to your lender to show that you would be able to meet the requirements of the new payment plan.


Mortgage Modification.

You may be able to refinance the debt and/or extend the term of your mortgage loan. This

may help you catch up by reducing the monthly payments to a more affordable level. You may qualify if you have recovered from a financial problem and can afford the new payment amount.


Partial Claim. Your lender may be able to work with you to obtain a one-time payment from the FHA-Insurance fund to bring your mortgage current.


You may qualify if:

1. your loan is at least 4 months delinquent but no more than 12 months delinquent;

2. you are able to begin making full mortgage payments. When your lender files a Partial Claim, the U.S. Department of Housing and Urban Development will pay your lender the amount necessary to bring your mortgage current. You must execute a Promissory Note, and a Lien will be placed on your property until the Promissory Note is paid in full. The Promissory Note is interest-free and is due when you pay off the first mortgage or when you sell the property.


Pre-foreclosure sale. This will allow you to avoid foreclosure by selling your property for an amount less than the amount necessary to pay off your mortgage loan.


You may qualify if:

1. the loan is at least 2 months delinquent;


2. you are able to sell your house within 3 to 5 months; and


3. a new appraisal (that your lender will obtain) shows that the value of your home meets HUD program guidelines.


Deed-in-lieu of foreclosure. As a last resort, you may be able to voluntarily “give back” your property to the lender. This won’t save your house, but it is not as damaging to your credit rating as a foreclosure. You can qualify if: 1. you are in default and don’t qualify for any of the other

options; 2. your attempts at selling the house before foreclosure were unsuccessful; and

3. you don’t have another FHA mortgage in default.




Your lender will determine if you qualify for any of the alternatives. A housing counseling agency can also help you determine which, if any, of these options may meet your needs and also assist you in interacting with your lender.

Call 1-800-569-4287or TDD 1-800-877-8339.




Yes. Beware of scams! Solutions that sound too simple or too good to be true usually are. If you’re selling your home without professional guidance, beware of buyers who try to rush you through the process. Unfortunately, there are people who may try to take advantage of your

financial difficulty. Be especially alert to the following:


Equity skimming. In this type of scam, a “buyer” approaches you, offering to get you out of financial trouble by promising to pay off your mortgage or give you a sum of money when the property is sold. The “buyer” may suggest that you move out quickly and deed the

property to him or her. The “buyer” then collects rent for a time, does not make any mortgage payments, and allows the lender to foreclose. Remember, signing over your deed to someone else does not necessarily relieve you of your obligation on your loan.


Phony counseling agencies. Some groups calling themselves “counseling agencies” may approach you and offer to perform certain services for a fee. These could well be services you could do for yourself for free, such as negotiating a new payment plan with your lender, or  pursuing a pre-foreclosure sale. If you have any doubt about paying for such services, call a HUD-approved housing counseling agency at 1-800-569-4287 or TDD 1-800-877-8339.

Do this before you pay anyone or sign anything.



Here are several precautions that should help you avoid

being “taken” by a scam artist:

1. Don’t sign any papers you don’t fully understand.

2. Make sure you get all “promises” in writing.

3. Beware of any contract of sale or loan assumption where you are not formally released from liability for your mortgage debt.

4. Check with a lawyer or your mortgage company before entering into any deal involving your home.

5. If you’re selling the house yourself to avoid foreclosure, check to see if there are any complaints against the prospective buyer. You can contact your state’s Attorney General, the State Real Estate Commission, or the local District Attorney’s Consumer Fraud Unit for this type

of information.




1. Don’t lose your home and damage your credit history.

2. Call or write your mortgage lender immediately and be honest about your financial situation.

3. Stay in your home to make sure you qualify for assistance.

4. Arrange an appointment with a HUD-approved housing counselor to explore your options at 1-800-569-4287 or TDD 1-800-877-8339.

5. Cooperate with the counselor or lender trying to help you.

6. Explore every alternative to keep your home.

7. Beware of scams.

8. Do not sign anything you don’t understand. And remember that signing over the deed to someone else does not necessarily relieve you of your loan obligation.

Act now. Delaying can’t help. If you do nothing, YOU WILL LOSE YOUR HOME and your good credit rating. Visit our web site at U.S. Department of Housing and Urban Development Office of Single Family Housing

451 Seventh Street, SW Washington D.C. 20410-3000


Bailout Money Has Not Trickled:

The bailout hasn’t trickled down to Main Street where the foreclosure crisis is far from over Print
By Mary Delach Leonard, Beacon staff   
Last Updated ( Sunday, 12 October 2008 )
Three alarming facts about failing home loans are worrying Karen Wallensak of Catholic Charities who works with troubled homeowners on the front lines of the foreclosure crisis.
 Wallensak, executive director of the agency’s Housing Resource Center in St. Louis, speaks in a calm, reassuring voice even when she is delivering bad news, such as her expectation that the mortgage crisis has “legs” that will carry it into the next decade. Catholic Charities is one of the local nonprofit agencies that make up the St. Louis Alliance for Homeownership Preservation that provides free counseling to troubled homeowners.”These are gloomy times,” Wallensak said. “I don’t think anything the federal government has proposed is going to mitigate this. From what I’m seeing, there are still waves of foreclosures that are going to ripple through our country and our community here in St. Louis for up to another three years.”

Worry No. 1:

In July, the number of prime loans in foreclosure moved ahead of the number of sub-prime loans in foreclosure. (The terms prime and sub-prime refer to the credit histories of the borrowers; sub-prime loans were generally made to people with less-than-perfect credit ratings.)

In July, 105,000 prime borrowers and 92,000 sub-prime borrowers entered into some stage of foreclosure, according to statistics compiled by HOPE NOW, a coalition formed by the lending industry that operates a national hotline for homeowners facing foreclosure. The number of prime borrowers facing foreclosures was about double the number recorded in July 2007.

“In July, sub-prime became old news in the mortgage crisis,” Wallensak said. “Part of that is just the impact of the economy. People are losing jobs, the cost of living is going up and folks who were on the edge and a paycheck away from disaster — and that describes probably two-thirds of Americans, whether they’re affluent or not — this is just toppling them right over the cliff.”

Worry No. 2:

About 3 million “Alt-A” mortgages have just started to re-set, with monthly mortgage payments increasing by as much as 150 percent. Alt-A loans, which stands for Alternative A-paper, include a variety of “creative financing” products that fall somewhere between prime (A loans) and sub-prime (B loans) and account for an estimated $1 trillion in loans. Nationwide, 16 percent of Alt-A loans made since January 2006 are at least 60 days behind in payments, according to statistics compiled by Bloomberg News.

In many cases, Alt-A loans required only minimum payments that were far lower than even the monthly interest on the loan. The difference between this minimum and what was actually owed was tacked onto the loan principal. Every month, the principal amount grew, and, in most cases, homeowners have little or no equity in the property. (To read about a Kirkwood woman who lost her house because of one of these kinds of loans, click here.)

“Many of these loans have gigantic re-sets. About one-third of them are what are called the pick-a-pay adjustable rate mortgages, where people could pick what they wanted to pay,” Wallensak said.

Alt-A loans were often sold to people who could not have afforded the monthly payments of a conventional loan — with the idea that they could refinance before the loans re-set. But the tight credit market and falling housing prices closed that escape hatch.

“What makes these loans so scary is that so many of them were what they called no-documentation loans or what we call ‘liar loans’ where people did not have to verify their incomes,” Wallensak said.

In 2006, the Mortgage Asset Research Institute reviewed 100 samples of no-documentation loans, comparing the “stated income” with IRS income forms. The group warned that actual income was overstated by more than 50 percent in nearly 60 percent of the loan samples.

“These loans were very lucrative for mortgage brokers. If they made them and sold them they got paid a handsome fee,” Wallensak said. “Some of the biggest entities that bought up these loans — Freddie Mac, Fannie Mae, Wachovia, Lehman Brothers — shall I continue the list?”

Worry No. 3:

Sub-prime borrowers with adjustable rage mortgages who received some type of loan modification during the first half of 2007 were again 90 days or more behind in their payments by the end of March 2008, according to a report by Moody’s Investors Service.

Wallensak attributes the rate of failure to the fact that lenders insisted on repayment plans rather than renegotiating the terms of the failed mortgages.

“During 2007, there were many foreclosures happening, and loan servicers primarily were not willing to modify loans. They just wanted to be paid back,” she said.

In most cases, these repayment plans allowed borrowers to make up missed payments and late penalties over a period of time, by adding an agreed amount to their monthly payments. Homeowners, who were already hard-pressed to make their original mortgage payments, were unable to sustain these higher amounts.

“So, we have perhaps a second wave of people coming who already received help once and who were not able to make good on the repayment plan they thought would work,” Wallensak said.

A slow-moving trickle

Wallensak’s worries, shared by other housing counselors, add up to a gloomy bottom line: While the $700 billion taxpayer bailout of Wall Street’s troubled financial institutions is trickling down through the economic stratosphere, the flood of foreclosures will continue on Main Street — pushed along by the free-falling stock market, loss of jobs and rising food and fuel prices.

In August alone, 303,879 properties in the United States were in some stage of foreclosure, according to Missouri ranked 15th with 3,755 foreclosures, while Illinois was ninth with 10,757.

“That ‘trickle down’ hasn’t trickled yet,” said Chris Krehmeyer, executive director of Beyond Housing, another nonprofit in the St. Louis homeownership alliance.

Krehmeyer said the massive bailout has yet to provide relief for individual homeowners. Although he credited Sen. John McCain for at least making an attempt to address the needs of individual homeowners with his rescue plan announced during Tuesday’s presidential debate, Krehmeyer has reservations about its effectiveness. He said the McCain plan doesn’t get at a critical issue — loan pooling — that has prevented individual homeowners from negotiating better loan terms with their mortgage servicers. (To read more of Krehmeyer’s analysis of the McCain proposal, click here.)

Risky mortgages were packaged, securitized and sold in pools to reduce financial risk to investors, who even now are unwilling to negotiate substantial loan modifications, the housing counselors say. What’s needed are reductions in principal — in light of falling housing prices — and lower interest rates to replace ballooning adjustable rate mortgages.

“We only have a small percentage of loans that are going south, but it is dramatic and it is significant and higher than in years past,” Krehmeyer said. “We need to figure out from a securities standpoint how to get at these loans — how do we stop as many as possible from going under. We’re still going to have a lot of people losing their homes, but is there any way we can minimize that damage? I’ve not heard anyone put up a macro solution.”

Eric Madkins, director of housing and foreclosure intervention for the Urban League of Metropolitan St. Louis, says that while the government and financial institutions concentrate on unclogging the banking system so money again begins to flow, troubled borrowers won’t see any relief until public policy is changed.

“On Main Street, until lenders and servicers of these loans look for ways to perform loss mitigation — whether it is reductions in principal or taking borrowers out of adjustable rate mortgages and placing them into fixed mortgages — the problem will persist,” Madkins said.

He adds that evaluating troubled mortgages is going to be an enormous task, amplified by the fact that the properties will have declined in value.

Economist Jack Strauss of St. Louis University said the government has tremendous latitude and could, in fact, cut through the tangled financial web of loan pools to intervene on behalf of homeowners.

Strauss said the government could take several actions, including freezing interest rates on re-setting adjustable rate mortgages.

Plans, such as McCain’s, to buy troubled loans have historical precedence, both during the Depression and in other countries, Strauss said. But he believes that lenders should be forced to accept a loss of at least 10 to 15 percent to keep taxpayers from bearing the full cost of the rescue. Strauss said few lenders would fight such a write-down because they lose two or three times that amount when properties go into foreclosure.

“There is no winner here. But even the banks would be better off because nobody wins in a foreclosure,” said Strauss, who is the director of the Simon Center for Regional Economic Forecasting at SLU.

Strauss believes that Congress could also help homeowners by rewriting federal bankruptcy laws to give judges the ability to force loan modifications.

Making matters worse

In the meantime, the worsening economy is adding more families to the foreclosure rolls, Madkins said.

“We are seeing families that are facing foreclosure not because they bought a house that was far beyond their means and had bad credit. These families have prime — not sub-prime — mortgages and are facing foreclosure due to unemployment, layoffs or under-employment. To stay afloat, the head of the household has to take a job that pays less than the original job,” he said.

Because of declining home values, refinancing is no longer a solution for these homeowners, and they quickly run out of options if lenders aren’t willing to work with them.

The counselors agree that the need far outweighs any available help.

For example, the Federal Housing Administration has just rolled out the Hope for Homeowners loan program to refinance mortgages for about 400,000 borrowers across the country.

“But there are millions of homes facing foreclosure, so it’s going to help some people, no doubt, but for most who are in foreclosure now or near to that point, I don’t see anything on the horizon that’s going to be of great help,” Wallensak said.

The sad reality is that by the time the crisis wanes, analysts predict that more than 2 million American families will have lost their homes. 

“And some of that is because so many people simply don’t have the income to sustain the mortgage. And if that’s the case, there’s little that can be done,” Wallensak said.

Wallensak cited the case of a tradesman who works in the now-suffering construction industry who asked for help because he was falling behind on his mortgage once more — after having negotiated a repayment plan with his lender. The principal on his loan is $300,000, and his mortgage had been $2,600 a month. He was now paying $3,700 a month.

“He makes about $30,000 a year, and I said, ‘Excuse me, sir, how can you possibly afford a $2,600 loan payment on $30,000, and he said, ‘Well, I did lots of side jobs’ — which weren’t reported to the IRS. And he had gotten a no-doc loan and didn’t have to declare his income,” she said.

Wallensak said that though the case was not typical of the people she normally hears from, she expects to see more of them as Alt-A loans fail.

“That’s what is going to be washing up on the beach — borrowers with more affluent incomes who have gotten loans they truly couldn’t afford from the first moment,” Wallensak said. “And I’ll have to tell them, ‘Unless your lender can modify the loan so you can afford it on your current income, we can not help.’ ”

Wallensak adds that those types of loans have contributed to a public backlash about the foreclosure crisis.

“A lot of folks ask me, ‘Why should I help bail out people who were careless or used bad judgment or didn’t tell the truth? But the case I just described is not common among our clients. Our clients usually have a lower income and may have made some mistake in judgment, but really a lot of times they just got a bad loan they didn’t deserve,” she said.

Wallensak said the agencies have a responsibility to be honest with homeowners whose budgets simply can’t sustain an unaffordable mortgage. The agencies have limited funds to assist homeowners and are careful to spend that money where it can have a real effect.

“We are that gut check for the homeowner,” she said.

Wallensak urges struggling homeowners to contact a housing counselor because even when no financial assistance is available, the agencies can assist them in planning their next moves.

Help in the meantime

Local housing counselors agree that state and federal officials could take some steps to ease the pain of homeowners, if even temporarily. For example, a 90-day moratorium on foreclosures could give homeowners a chance to seek remedies — or at least consider options.

They say state legislators could help by changing Missouri from a non-judicial foreclosure state, where no court action is required, to a judicial state, such as Illinois, where the process is court-administered. The change would lengthen the foreclosure process, which can take as little as 60 days in Missouri, giving homeowners more time to seek a solution. In Illinois, foreclosures can take a year.

Other actions include stronger oversight of mortgage brokers and the lending industry.

“If there is anything this has shown is there is a place for regulation,” Wallensak said. “Allowing the mortgage industry to run amok with no oversight leads to disaster. I don’t want to over-regulate, but I think some responsible oversight of the mortgage lending industry is called for. And if we don’t learn that much from this crisis, then I would just throw up my hands.”

Contact Beacon staff writer Mary Delach Leonard.



There is a Scammer Born Every Minute

This is an interesting story. All those scammers who had destroyed this real estate market in the first instance, are coming back to surface for the last kill. These are vultures. Make sure, if your telephone ring at dinner time, or any time of the day, you only talk to qualified people. First get their name, and telephone number, and ask them which attorney are law office is handling the loan modification. It is important to get their phone number and other business licenses. Maybe you recognize someone who already scammed you previously.  You never know, if you meet him again. You know what to do this time. Every minute a new scammer is born. Watch out.

Here, is this interesting article.

There’s a scammer born every minute Print
By Mary Delach Leonard, Beacon staff   
Last Updated ( Wednesday, 30 July 008 )
For American homeowners drowning in mortgage and consumer credit debt, here is a grim warning from law-enforcement agencies: There are sharks in the water.

 * On Monday, Missouri Attorney General Jay Nixon announced “Operation Stealing Home” to crack down on mortgage fraud and financial predators taking advantage of homeowners facing foreclosure. Nixon’s office filed lawsuits against seven individuals and businesses accused of defrauding customers through refinancing, advance fee and foreclosure consulting scams.

* In May, a national alert against foreclosure scams was issued by the U.S. Treasury Department’s Office of the Comptroller of the Currency, which charters, regulates and supervises all national banks.

The alert warned against variations of lease-back and repurchase scams that promise financially distressed homeowners they can stay in their homes.

Basically, the schemer offers to pay the mortgage and rent your home back to you. Often, they may promise to sell the home back to you when you’ve recovered from your troubles. In the meantime, the homeowner is asked to transfer the property deed, often to a third party, who now has the power to sell your house, charge you sky-high rent, evict you and, most likely, steal whatever equity you had in the house. In the meantime, you are still responsible for the mortgage and if the schemer stops making your monthly payments, you still end up in foreclosure.

* Local FBI agents are actively investigating mortgage fraud in the St. Louis area, with the U.S. Attorney’s office prosecuting nine cases between March 1 and June 18. “Operation Malicious Mortgage,” a national FBI effort during that same time, netted charges against 406 defendants, responsible for $1 billion in fraud. Nationwide, the FBI has 15,000 mortgage fraud cases pending, up from 436 in 2003.

Maxwell Marker, assistant special agent in charge of the FBI’s St. Louis division, said that as funding dried up in the mortgage market, schemers began shifting to foreclosure-based scams.

You’ve been scammed?

Report it

Law-enforcement officials say fraud often goes unreported because the victims are either embarrassed, or they don’t think there is anyone who can help them.

“Folks often think, ‘Oh, this is just about me, and it’s not a federal matter,” said agent Maxwell Marker of the St. Louis division of the FBI. “We may not be able to address your individual case right now, but we will take all your information and data. It’s very important that we have that intelligence, so we can start connecting the dots.”

St. Louis FBI: (314) 231-4324

Missouri attorney general’s Consumer Protection Hotline: (800) 392-8222 or

Illinois Attorney General Consumer Fraud Hotline: (800) 243-0618

“They’ll identify individuals who are in financial distress but have some degree of equity in their property. They essentially make an offer that can’t be refused,” he said.

Marker said the FBI has seen lease-back schemes in St. Louis but not to the degree that it has occurred in other cities, such as Atlanta, Las Vegas or on the West Coast, where the fallout from the mortgage crisis has been more severe.

The most common form of mortgage fraud in St. Louis is a form of flipping. Schemers purchase run-down properties and then resell them at huge profits, based on fraudulent appraisals claiming rehab work that was never done, said Alan Peak, supervisory special agent of the St. Louis FBI.

Fraud Alert: Advice for consumers

Financial predators find their victims through public records of foreclosure and bankruptcy filings, advertising and by purchasing mailing lists. They might contact you by phone, email, direct mail or even show up at your door. Know whom you are dealing with.

“It’s difficult to sort out who is legitimate and who is not,” said agent Alan Peak of the St. Louis FBI. “When you start getting into financial difficulty you may make inquiries through legitimate avenues, but the con men will buy mailing lists from those companies.”

Here are some tips:

* Seek free advice from housing counselors at HUD-approved agencies.

* Work through reputable lenders and Realtors; check their licenses with the state, county or city regulatory agencies.

* Ask a lot of questions. If something doesn’t sound right to you, it probably isn’t.

“We see crime victims all the time who say that something just didn’t seem quite right to them,” said agent Max Marker of the St. Louis FBI. “Trust your instincts.”

* If you are asked to hide information from your lender, it is a warning sign that something is not above-board.

* Seek legal advice before transferring the deed of your property to an individual who has promised to help you. Often, the request is for a Quit-Claim Deed.

* Never sign a blank document or a document containing blanks. Don’t sign anything you don’t understand. “At the end of the day, a good attorney can be worth the money,” Marker said. Check with the state bar association for records of discipline before hiring an attorney.

* Check with the Better Business Bureau before working with anyone offering assistance, but keep in mind that just because the BBB has no complaints on file, doesn’t guarantee that the organization is legitimate.

* Use resources on the Internet, such as the FBI website. Check out the people you are dealing with at websites where consumers catalog their complaints against lenders, brokers and servicers. (You can often find these sites by doing a simple Internet search; google the name of the organization or individual and the word “complaints.”)

* Stay informed and know the status of your proceedings. Be wary if your “helper” doesn’t keep you informed about what they are doing on your behalf.

* Remember the adage: “If it looks too good to be true, it probably is.”

“They go into targeted areas and purchase vacant properties for $30,000 or $40,000. Sometimes, in as little as 72 hours, they will sell those properties to a straw buyer they have lined up, in some cases for $130,000 or $140,000 using a fraudulent appraisal report,” Peak said.

Ultimately, the mortgages are sold on the secondary market and the property ends up in foreclosure again, still in the same run-down condition and still worth only $30,000 or $40,000. In the short term, though, property values in the neighborhood go up, driven by the inflated sales prices. That, in turn, drives up property tax assessments. When the schemers pull out, property values plummet, and the neighborhood is left holding the bag.

“We’re all the victims,” Marker points out. “It affects every single one of us. It affects us in the fees we pay to get a mortgage. It affects us in our property values. It can affect individuals from $20,000 properties to multimillion-dollar properties. It affects the gamut.”

Mortgage fraud can take years to unravel, the agents say. In one of the biggest local cases, the FBI tracked 65 flipped properties to the same group.

Marker said the scammers usually target individuals who are unsophisticated in financial matters, or they work through places of trust, such as churches. They might co-op a church member who will then share his or her good fortune with others. And they are industry-savvy.

“They’re very good at exploiting any crack in the system. We’ll identify one of those cracks and work with the industry to close it, and they’ll move somewhere else,” Marker said.

Expect to see the Missouri attorney general’s office file more lawsuits against predators, said John Fougere, a spokesman for Nixon. Fougere would not put a number on pending investigations but said announcements of such legal actions often spur other consumers to contact authorities about similar experiences.

Fougere said predators take advantage of flood and tornado victims, so it is not surprising to find them at work during a financial crisis.

Even people who know better can fall for schemes when faced with financial troubles, the FBI agents say.

“When somebody is desperate and they see that life (preserver) ring out there, they’ll grab for anything,” Marker said.

The agents say they will be watching for new schemes after housing-rescue legislation is signed into law.

“Anytime there’s a big pool of money out there, there are bad guys lurking in the shadows trying to figure out how to get their hands on it,” Peak said.

 Contact Beacon staff writer Mary Delach Leonard.