Mortgage Relief Companies Can Put Debtors in Even Worse Financial Shape

If you are facing a default on your mortgage that could lead to foreclosure of your home, beware of the multitude of companies offering mortgage loan relief. These entities are often ineffective in helping resolve critical debt situations, and they can sometimes make things worse, whether through inefficiency, mismanagement or the perpetration of scams.

Mortgage relief companies are regulated by federal rules. But many do not fully comply, and their actions can hurt homeowners in a number of ways. They might give misinformation about relief options available. They might offer refinancing on terms that provide immediate relief but that can be financially harmful in the long term, such as increased interest rates or accelerated payments. These companies also frequently charge significant fees and costs that add to the debtor’s burdens.

The most serious danger that homeowners risk in dealing with noncompliant mortgage relief companies is the possibility of falling victim to multiple types of scams, such as the following:

• Sham loan modification — The company promises to negotiate with your lender to lower your monthly mortgage payment, interest rate or principal balance. However, the company will often charge you an upfront fee for their services and might never actually engage in negotiations.
• Equity skimming — The company gets you to sell your home to them for less than the average price for comparable homes in the area, promising to find an outside buyer and to pay you a portion of the profits when the home sells. But instead, they pocket the money.
• Bait-and-switch or rescue loan schemes — The company offers to save your home from foreclosure by refinancing your mortgage. Instead, they trick you into signing over the deed to your home.
• Rent-to-buy rip-offs — The company promises that if you transfer the deed to the home, they will obtain their own financing to save the home from foreclosure. They allow you to stay in the home as a renter, claiming that your rent payments will go to helping you buy back the home. But instead, you become a mere tenant while still being obligated on the mortgage.

If you’re faced with mortgage default, Chapter 13 can be a far better option for stopping foreclosure proceedings. When you file for Chapter 13, an automatic stay takes effect. Your lender is prohibited from foreclosing on your home while the stay is in force. Additionally, a Chapter 13 bankruptcy can help you reduce your monthly mortgage payments. Before talking to mortgage relief companies, you should consult with an experienced bankruptcy attorney, who can determine whether Chapter 13 is a better way for you to save your home and who can assist you in the process.

At the Law Offices of Michael Jay Berger in Beverly Hills, we help people throughout Southern California use Chapter 13 bankruptcy to fight foreclosure and provide mortgage debt relief. Please call 310-271-6223 or contact us online to arrange a free consultation at one of our conveniently located offices.