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Bankruptcy Foreclosure Rescue

Bankruptcy foreclosure scams target people whose home mortgages are in trouble. Scam operators advertise over the Internet and in local publications, distribute flyers, or contact people whose homes are listed in foreclosure notices. They may promise to take care of your problems with your mortgage lender or to obtain refinancing for you. Sometimes they ask you to stop making your mortgage payments or to make the payments to them. But instead of contacting your lender or refinancing your loan they pocket the money you paid and then file a bankruptcy case in your name, often without your knowledge. If this happens you could also lose your home. So proceed with care in dealing with an individual or company that:

  • Makes an unsolicited contact and uses high-pressure sales techniques,
  • Calls itself a mortgage consultant, foreclosure service, or similar name,
  • Contacts people whose homes are listed for foreclosure,
  • Asks you to make your home mortgage payments directly to them, or
  • Asks you transfer you property deed or title to them.

Some ways to avoid becoming a victim of a loan-modification scam are listed below:

  • Do not transfer ownership of your home to someone who promises to save it.
  • Do not pay advance loan-modification fees to anyone, including a real estate licensee or an attorney.  Advance fees are now prohibited by California Senate Bill No. 94, which took effect on Oct. 11, 2009.
  • Be careful in selecting an attorney.  Do not rely on ads that claim the attorney is a member of the State Bar of California.  All attorneys are members of the Bar and not all have special knowledge, experience, or expertise in loan modifications.  In fact, it appears that many attorneys offering these services have little or no prior experience in loan modifications.
  • Read all documents carefully before signing them.
  • Do not make your mortgage payments to anyone other than your lender.
  • Do not work with anyone who tells you not to contact your attorney, lender, or a credit or housing counselor.
  • If you deal with a foreclosure consultant as defined in California Civil Code Sec. 2945.1 who is not an attorney or a real estate broker, make sure that person has obtained a Certificate of Registration as a Mortgage Foreclosure Consultant from the California Department of Justice.  This requirement went into effect on July 1, 2009.
  • Before hiring a consultant check the California Attorney General’s website at www.ag.ca.gov/loanmod for tips to avoid being scammed and other information.

If you can’t pay your mortgage, call your lender as soon as possible for help.  You don’t have to be in default to obtain a mortgage modification, as discussed below. The further behind you fall the more likely you are to lose your home.  There are also many non-profit agencies that can help you with loan modification without a fee.  You can get a list of housing counselors approved by the U.S. Department of Housing and Urban Development on its website at www.hud.gov on the page entitled Foreclosure Avoidance Counseling.  Their services are provided free of charge.  There is no need to pay a private company for these services.  Notice of this is now required under Senate Bill 94 as a separate statement prior to entering into any fee agreement with the borrower.  Remember, if you do engage a real estate broker or attorney, pay their fee only after they have completed their work.

Other sources of assistance are the San Diego Housing Opportunities Collaborative and HOPE for Homeowners.. The former provides free clinics and counseling. It can be contacted at (619) 283-2200 or online at housingcollaborative.org. The latter partners with mortgage companies, local government, and others to reduce foreclosures. It can be contacted on its 24-hour hotline at (888) 995-4673.

If you suspect a scam call the Real Estate Fraud Subdivision of the San Diego County District Attorney’s Office at (619) 531-3552. If bankruptcy proceedings are involved, call the United States Trustee at (619) 557-5013. The Trustee is a U.S. Justice Department official who monitors the bankruptcy system.

If you paid a licensed attorney for assistance in obtaining foreclosure relief and the attorney failed to perform legal services with competence, you should file a complaint with the State Bar by calling the Attorney Complaint Hotline at (800) 843-9053 or by filing a written complaint.  Information on filing a complaint and the complaint form are available on the State Bar website at www.calbar.ca.gov.  The grounds for ethics violations in dealing with foreclosures can be found on the State Bar website by searching for Ethics Alert and selecting the document entitled Legal Services to Distressed Homeowners and ...  Note that attorneys are prohibited from contacting you in person or by telephone based on a referral from a foreclosure consultant or someone else unless the attorney has a family or prior professional relationship with you.

In addition to these California remedies, consumers can file a complaint with the FTC by calling (877) 382-4357 or going to https://www.ftccomplaintassistant.gov/.  In its Mortgage Assistance Relief Services (MARS) Rule, the FTC is now banning mortgage relief companies from collecting advance fees and telling consumers to stop communicating with their lenders or loan servicers.  It is also requiring companies to disclose the following:

  • They are not associated with the government, and their services have not been approved by the government or the consumer’s lender or servicer.
  • The amount of their fee.
  • The lender may not agree to change the consumer’s loan.
  • Consumers may lose their home and damage their credit rating if they stop paying their mortgage.
  • Consumers may stop doing business with the company at any time, accept or reject any offer the company obtains from the lender or servicer, and if they reject the offer, they don’t have to pay the company’s fee.

Companies are also prohibited from making any false or misleading claims about their services or those of any alternative relief providers, the likelihood of consumers getting the results they seek, or the amount of money consumers will save by using their services.

Under the federal Making Home Affordable Program borrowers can apply for a mortgage modification if they are having difficulty paying their mortgage because their payment has increased significantly, their income has declined, or they have suffered a hardship, e.g., unexpected medical bills.  There is no requirement for default.  The following other requirements apply:

  • The amount of their fee
  • The amount owed on the first mortgage must be equal to or less than $729,750
  • The mortgage must be older that Jan. 1, 2009
  • The current monthly payment is more than 31 percent of your gross monthly income
  • You must be able to pay up to 31 percent of your gross monthly income on a reasonable mortgage


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