Written by Craig D. Robins, Esq.
Government considers placing restrictions on loan modification companies
Fraudulent mortgage rescue schemes is reaching an “epidemic.” This is what several federal and state agencies said last week in a joint press conference as they pledged to increase efforts to investigate and crack down on loan modification abuse and companies offering help for homeowners.
Many Americans who have been caught hard by the recession and are scrambling to avoid foreclosure have become easy prey to dishonest mortgage modification companies.
.This is especially prevalent here on Long Island where I regularly meet with clients in my Long Island foreclosure defense and bankruptcy practice. I frequently hear tales of woe from clients who paid thousands of dollars upfront to companies who promised them the moon, but sadly produced absolutely no results.
See my previous post: Can You Trust a Mortgage Modification Company?
Many, many dishonest mortgage modification firms across the country
Now the Federal Trade Commission is considering an outright ban on upfront mortgage modification fees because so many dishonest companies have taken advantage of innocent homeowners.
In addition, the U.S. Treasury, Department of Housing and Urban Development, and Justice Department said they plan to alert financial institutions to emerging mortgage modification schemes, step up enforcement actions and educate consumers.
The FTC also said that when a mortgage modification firm asks for an advance fee, it’s a red flag that the service is bogus.
Another common problem involves the many companies who use deceptive advertising that is designed to trick consumers into thinking that they are participating in a government program.
Meanwhile, the FBI announced that it has over 2,600 mortgage fraud cases open, most of which involve substantial losses of more than $1 million.
Some Long Island homeowners have actually lost their homes because they relied upon mortgage modification companies to save them, but the companies utterly failed to do anything other than take their money.
A statement made by the Governor of Connecticut summed up well the current sentiment at the press conference: “These mortgage rescue scams raise false hopes and then cruelly exploit them, which is why my office is fighting them and welcomes the federal government as a strong ally.”
Free Housing Counselors
Although my office provides bankruptcy and foreclosure defense legal services, we do not do mortgage modifications. For that, we recommend obtaining free help from government-approved housing counselors..
Homeowners can locate free government-approved housing counselors at http://www.makinghomeaffordable.gov or by calling (888) 995-HOPE.
Written by Craig D. Robins, Esq.
Yes! Bankruptcy Is Still Available in New York
In 2005, Congress made drastic revisions to the bankruptcy laws. Even though that was three years ago, clients regularly ask me if they can still file for bankruptcy.
Most people still qualify. We find that 7 out of 8 people who would have qualified for Chapter 7 bankruptcy under the old laws still qualify under the new laws.
These laws make the bankruptcy process more involved, and impose many new obligations on both debtors and their attorneys. However, most consumers, especially those on Long Island, are still eligible for Chapter 7 bankruptcy.
The essence of the new laws is demonstrating eligibility for filing by using a series of formulas and calculations called the “means test.”
The new bankruptcy laws also require a 30-minute bankruptcy credit counseling session by phone with a court-approved not-for-profit credit counseling agency prior to filing, and a similar session, called debtor education, after filing.
Debtors must also produce copies of pay stubs and recent tax returns.
Here’s the bottom line: Although the laws have made bankruptcy much more complex than it ever was before, the truth is that most people who would have qualified for Chapter 7 bankruptcy under the old laws still qualify under the new laws. Those who don’t qualify for Chapter 7 can usually file a payment plan bankruptcy — Chapter 13 bankruptcy.
An experienced New York bankruptcy lawyer should be able to quickly ascertain which bankruptcy chapter is best.