5 On Your Side

Down economy spawns foreclosure schemes

The number of complaints foreclosure-relief or mortgage-modification schemes in North Carolina jumped from seven in 2007 to 270 so far in 2009, according to the state Attorney General's Office.

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RALEIGH, N.C. — A down economy creates opportunities for people trying to take advantage of others – including homeowners facing foreclosure.

In 2007, the state Attorney General's Office got seven complaints about foreclosure-relief or mortgage-modification schemes. So far this year, the office has received 270 complaints.

Thomas Cooper never thought he fall victim to such a scam when he bought his first house in Atlanta in 2001. But problems began when his interest rate got raised after he had moved to Durham, bought a house and rented his Atlanta house .

"My tenants were getting ready to move out, and things were getting tight. And I needed to refinance, or I needed a loan modification," he said.

When his efforts to refinance didn't work, Thomas Cooper answered an email from Home Assure, a Charlotte-based loan-modification company.

He described promises from the company: "We'll negotiate. You'll get a lower payment. They might forgive a payment. The loan mod will be a better financial situation for you."

"OK," he said, "that sounds good. Help me. Save me."

After phone conversations and email exchanges, he paid Home Assure a required $1,500 upfront fee. It came with a written guarantee:

"If we are unsuccessful achieving an affordable solution, then you are refunded the entire fee you paid us. Every penny."

Thomas Cooper said Home Assure's solution was not affordable.

Instead of a loan modification, he got "a repayment plan of $2,866.83 (per month) for almost two years. My payment was $2,000 when I started the process," he said. On top of that was a $4,000 catch-up payment.

"I said, 'Is this a loan modification for me or the lender?'" Thomas Cooper said. "It was all just a scam. It was ridiculous."

He asked for a refund but didn't get it.

Such companies "are out there trying to make a buck off people's misfortune," Attorney General Roy Cooper warned.

He said Home Assure is one of 51 loan-modification companies he targeted under a relatively new law that makes up-front fees illegal.

"This law has helped us tremendously, because now we don't have to prove whether or not the person has helped the borrower. All we have to do is show that they took money up front and, immediately, and they're in violation of the law," Roy Cooper said.

But in most cases, the borrower's money is already gone.

"Then they're poorer. They've given their money to this scam artist. They can't make their payment. Foreclosure happens, and they're worse off than they were," Roy Cooper said.

That situation happened to Thomas Cooper, so he shared his story to warn others.

"Don't let desperation make you make the wrong decision, because these people are predators," he said.

For free help dealing with the closure, call the Homeownership Preservation Foundation's hotline at 1-888-995-HOPE. The nonprofit group hotline is open 24 hours a day, seven days a week for free counseling on ways to avoid unnecessary foreclosure.