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Just in case you’ve forgotten, this whole financial mess started with bad mortgages.
And those bad mortgages have led to record numbers of foreclosures. The Web site RealtyTrac.com reported this week that foreclosure filings in September were up 71 percent over last year. The head of the FDIC said this week that the government needs to do more to help those people stay in their homes.
Plenty of other groups are out there advertising that they can help, but Marketplace’s Alisa Roth warns to proceed with caution.
Alisa Roth: This is Queen’s Village. It’s a lower middle class neighborhood in eastern Queen, populated mostly with single-family and semi-attached houses. Off the main shopping drag, the neighborhood feels suburban — squealing kids, chirping birds — but the neighborhood has one of the highest foreclosure rates in the city.
Joy:The houses are normal — normal family house.
Joy is desperately trying to avoid becoming the neighborhoods next foreclosure. Her lawyer agreed to let her talk to me on the condition I only refer to her by a nickname. She bought her house 30 years ago.
Joy: These are dining room, living room, kitchen, bathroom downstairs and bathroom upstairs, three bedroom and the attic. And the basement…
She bought it for $48,000, but refinanced the loan a couple of times.
Joy: I never take no money from the house for me, for myself — always take it and fix the house and for do things that have to be done.
By 2003 her mortgage was around $270,000, which meant her payments were $2,000 a month. To make the money she’s been working three jobs as a home health worker and nurses aids — double shifts six days and nights a week. But it all fell apart when she got sick a couple of years ago.
Joy: I failed to pay the mortgage, so when I called Option One [the mortgage servicer] to ask them if I can pay them, see if I can send them one month, they say they won’t accept one month and that I have to send them all the three months. I wasn’t able to pay all those three months at once.
Joy was desperate and terrified that Option One would take her house away. A friend told her about a place called Homesavers. She went and talked to the owner, Phil, who promised he could save her house; all she had to do was temporarily sign over the lease to somebody else, a man named Blaze, and he’s take care of the payments for a year. it’s a classic foreclosure rescue scam.
Jessica Attie: What they don’t tell the person is that they’re transferring their deed.
Jessica Attie is an attorney with non-profit South Brooklyn Legal Services.
Attie: The person to whom they’re transferring it is taking out a much bigger mortgage on their house and cashing out all the equity, and then there’s no way that the original homeowner can get their home back.
That’s exactly what happened to Joy. Blaze and Phil took out a new mortgage worth almost half a million dollars. They pocketed more than a hundred grand and ended up doubling Joy’s monthly payments to around $4,000 a month. Attie says she sees these cases all the time.
Attie: I had a client who had a $200,000 mortgage on her house. She was suffering from Alzheimer’s and somebody said he would help her keep her home. She transferred her deed; he took at $1.9 million on her house and he kept the $1.7 million in difference. Obviously there’s no way that she can then get the $1.9 million to get her house back. So, it’s a way for people to strip all the equity people have in their houses and take away any chance they have of keeping their homes.
Attie says the scammers use all kinds of tricks to lure their prey; they solicit door-to-door, the visit churches, they bombard victims with flyers promising to save their houses. Oda Friedheim is an attorney in the Queens office of the Legal Aid Society. She says to avoid being tricked, you need to be skeptical.
Oda Friedheim: What we urge is not to not believe that somebody can sell you the Brooklyn Bridge and save a home — to really scrutinize these deals and never sign anything that you do not understand of haven’t read.
Get your own independent lawyer. Many scammers provide their victims with the service of a lawyer, he may even be a real attorney, but it’s a safe bet he’s in cahoots with the scammer. Attorney Attie says most important of all is not to let the desperation of the situation convince you to do something you shouldn’t.
Attie: When you’re in foreclosure, it doesn’t necessarily mean that you have no options. Some of these people, if they had come to our office, they could have helped them refinance into a lower interest loan.
I asked Joy why she hadn’t done that. She said she just wasn’t thinking straight.
Roth: When you first talked to Phil, did you have any reason not to believe what he said? Did you feel at all…?
Joy: When you’re in trouble, no matter what people tell you they’re going to help you, you just see their help. You don’t see the consequences. You just see, ‘Oh, you’re going to help me? That’s fine.’ That’s all.
Queens is hardly the only place that’s seeing this kind of illegal activity. Housing advocates like Friedheim and Attie say big cities all over the country have seen more of these tricks lately as foreclosure rates keep going up.
Easy credit and high home prices made these scams particularly lucrative, so I tighter credit market and falling property values may help get rid of them. And states are starting to wise up; Following the lead of several others, New York recently passed a law designed to protect homeowners from these kinds of cons. But homeowners still need to watch out for themselves.
In New York, I’m Alisa Roth for Marketplace Money.
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