Legal Solutions for You,
Your Family & Your Business

If You Don’t Have Much Equity

If you have little or no equity in your home, you probably won’t be approached by anyone who wants title; what would be the point? But if you are close to a foreclosure sale, there are plenty of other snake-oil peddlers out there.

For a stiff up-front fee—often in the thousands of dollars—they offer to help you fight your foreclosure by finding affordable loans or by negotiating with your lender for a mortgage modification, an interest rate freeze, or an arrangement in which your missed payments get added to the end of your loan. In short, they charge you to do what the nonprofit counseling agencies do for free. But not only will you not get results, there’s a good chance that the rescue company will disappear once it has your money in hand.

EXAMPLE: Frieda and Ted are in foreclosure. They are trying to negotiate a workout with their servicer but are continually told to be patient and that their proposal is moving through the process. Their home is due to be sold in three weeks and they are beginning to panic. They wake up one morning to find a flyer on their doorstep advertising the Compassionate Care Foreclosure Rescue Service, which seems tailor-made for their difficulties. The flyer asks, “Is your home about to be sold at a foreclosure sale? Are you having trouble negotiating with your mortgage servicing company? Want to refinance your mortgage at a low interest rate? We can help!”

 

They call the number on the flyer and are referred to a “foreclosure rescue specialist,” Nick, who tells them in a soothing voice that Compassionate Care has helped “thousands of people just like you” work out their mortgage difficulties and stay in their homes. After Frieda and Ted give him information about their plight, Nick tells them that he can negotiate with the servicer on their behalf and get an extension of the foreclosure sale date so they’ll have more time to work something out. The fee: $1,500, up front.

 

Frieda and Ted borrow the $1,500 from Frieda’s son and send a cashier’s check to Nick at a post office box, along with a signed power of attorney form that Nick says he needs so he can negotiate with the servicer. A few days later Nick tells them that he has gotten the foreclosure sale postponed. Two weeks later, after the date the home was to sold at the foreclosure auction, Frieda and Ted get a call from someone they’ve never heard of telling them that he bought their home at the foreclosure sale and wants to make arrangements for them to move out. Frieda and Ted call Nick in a panic. The number has been disconnected. Frieda and Ted have lost their home—and paid $1,500 for the privilege.

Remember that if something seems too good to be true, it probably is. Or, as my father taught me: You don’t get something for nothing. I confess that I started to doubt this over the past five or 10 years. A good credit score could produce hundreds of thousands of dollars just for the asking, and it was easy to forget about the debt because of soaring property values and the marvelous tool known as refinancing. Now that the balloon has popped, it’s time to dust off these old truisms.