Foreclosure Rescue Or Trap?

By: Natasha Trelfa Email
By: Natasha Trelfa Email

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These little-known companies often ask for thousands up front, claiming they can renegotiate with your lender to lower interest rates. If not, they will refund your money. That's where the trouble starts.
It's a scam local officials said is already popping up here, but they expect to see become a even worse in the coming months.

"Like anybody that's been through a scam, you can't explain why you fell for it," said Liz Wiley, who had trouble with a company offering to renegotiate her mortgage.

Wiley said when she and her husband purchased their San Diego home in 2006, they had no idea just how bad the housing market would get. Barely two years later, they found themselves looking to renegotiate the interest rate on their mortgage to avoid trouble.

"I started looking for alternatives and got the post cards for loan modifications," said Wiley.

She said they found People's First Financial in May of 2008. The company claimed it would renegotiate with lenders, for a substantial fee, to get interest lower rates. If they failed, money was refunded. Months later after moving back to Kansas, Wiley says she's struggling to even keep contact with the company.

"They kept saying we're working on it, so they hadn't failed yet," said Wiley.

Officials said companies like People's First Financial often scam using a handful of techniques:

The phantom help, where the company charges outrageous fees for little assistance, and at times even tries to go after the equity of the home. The bait and switch is where homeowners unknowingly give up ownership. Finally, the bail out in which people surrender ownership believing they'll be able to eventually repurchase the home.

"They all basically center on convincing the consumer that they will stall or prevent a foreclosure action," said Kevin Glendending with the State Bank Commissioner's office.

Another red flag is when the companies advise people to flat out stop paying. That's exactly what Wiley was told, but didn't buy into.

"They advised us off the record to go late and stop paying that second mortgage," said Wiley.

With these companies often working nationwide, it's prompted Kansas officials to look at adding additional legislation this session to further protect consumers.

"We have taken a number of actions against these entities recently," said Glendening.

The Wiley's say they are lucky. They were eventually able to get the option for a lower interest rate just a few weeks ago. That rate, however, Wiley said barely saved a thousand dollars. It was headache she said was hardly worth it.

"I would really like to see what they did for me," said Wiley.

Sedgwick county consumer fraud officials say they've had about 20 complaints about these companies in the past year, but they expect that number to increase in the coming months.

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