Anytime I'm solicited by advertisers offering to "rescue" me from financial straits, I picture pointy horns under the angelic locks and sulfur fumes leaking from beneath the saintly robes.
The scepticism is well founded. The housing crisis, like the housing boom before it, has been a breeding swamp for flimflammers intent on stripping victims of cash and dignity.
The state Attorney General's Office fumigated one corner of the swamp last week in closing down four affiliated foreclosure rescue companies in South Florida. About 350 customers had complained that they'd received little or no help after paying up-front fees ranging as high as $5,000.
Of the roughly 80 foreclosure assistance companies the attorney general is investigating statewide, at least 15 are based in the Tampa Bay area.
Earlier this year the state shut down a Tampa company called Homekeeper USA. It accused owner James T. Pappas of charging up-front fees in violation of Florida law. The rest of the entities — including Clearwater's Law & Associates, Tampa's Strong Family Fund and New Port Richey's Mortgage & Refinance Solutions — get at least a presumption of innocence until the investigations are complete.
Since thousands of Tampa Bay homeowners are grappling with late payments on their mortgages, let's describe three main types of scams in our region:
Foreclosure Equity Skimming: You've missed house payments and gotten a grim notice in the mail that the bank has initiated foreclosure. Someone appears at your door with an I'm-here-to-help-you grin. These predators operate by targeting homes in which the equity exceeds the mortgage amount. They work by persuading the homeowner to sign over the deed. At that point they'll either siphon off the equity and leave the homeowner worse off or they'll seize ownership of the house for a fraction of its real value. This trap is easy to avoid: Don't sign over ownership of your house to a stranger.
Foreclosure Rescue Scam: If the equity thieves are full-course gluttons, the rescue scammers are usually nibblers. They make their money on volume by charging up-front fees of $300 to $5,000. In return they pledge to renegotiate your mortgage with the bank. Leaving aside that most rescuers have no mortgage background — and more than a few have minor criminal records — why hand $1,900 to a noncredentialed business person? In fact, Florida banned advance fees in last year's Foreclosure Rescue Fraud Prevention Act. (Lawyers and mortgage brokers are usually exempt.) That's not to say you can't hire someone to deal with the bank. Just be sure the person is knowledgeable and doesn't overcharge.
Short-Sale Scams: Here's another field crammed with ethical pitfalls. These practitioners operate by persuading a bank to accept a purchase price below the mortgage value on the house. Then they flip the house for instant profit. It's an ethical gray area because the second buyer usually has no idea he could have dealt directly with the bank. In an egregious recent case, a Tampa short-sale company paid off the bank and instantly resold a house for $140,000 more. Here's the kicker: The real estate agent assured the buyer he was paying the bank's asking price. He didn't know about the markup and is steamed about the deception.
If anyone offers to save you from mortgage misfortune, he may simply be Honest Eddy. But you'd better check if the angel wings are paste-ons.