Loan Modification

FHA Vs. Mortgage Rescue Companies

By Peter G. Miller

In New York the state attorney general, Andrew Cuomo, has sent cease and desist letters to more than 200 mortgage rescue companies.

I bring this up because if you’re an FHA loan borrower you don’t have to be involved with mortgage rescue companies. Here’s why:

One reason comes from the Cuomo letter. While rules concerning mortgage rescue companies vary by state, Cuomo has the right idea in general:

“Mortgage rescue companies,” says the NY attorney general’s office, “target homeowners facing foreclosure by claiming to be able to modify home mortgage loans and lower monthly payments. Often, these companies engage in deceptive and illegal marketing practices to lure customers and then fall short on their promises. After using a mortgage rescue company, homeowners can find themselves in worsened financial circumstances and at greater risk of losing their homes.”

Here are some of the practices cited by Cuomo which are prohibited in New York state as well as many other jurisdictions:

___ Charging up-front fees for consulting services;

___ Failing to enter into written contracts with homeowners, in the language the homeowners use, that fully disclose the exact nature of, and fees for, the services to be provided;

___ Failing to allow homeowners to cancel their contract, without any penalty, within five business days after signing and failing to provide homeowners with notice of this right in the contract;

___ Using any deceptive and misleading advertising practices, including: false guarantees regarding success rates, false 100% money-back guarantees, and fabricated consumer testimonials;

___ Using any advertisements designed to give consumers the false impression that a company is affiliated with the government or a government-sponsored program.

The FHA Approach

To their great credit HUD and the FHA deserve good marks in the field of foreclosure prevention. Historically, HUD has had very solid results “curing” delinquent loans. In fiscal 2009 FHA annual report says that ?82.7 percent of the HUD-held loans that are 90 days or more delinquent were brought under control.?

So, if you get stung financially by the loss of a job, an illness, accident or divorce — the traditional causes of foreclosure — at least look into the services offered by HUD.

To start, get in touch with a HUD foreclosure avoidance counselors at http://www.hud.gov/offices/hsg/sfh/hcc/fc/.

There is no charge for this service. You don’t need to pay anyone, anything. Just go to the website, contact HUD, and see what help is available.

For FHA loan borrowers the good news is that first, HUD is there to help. Second, HUD has a very high level of success.

And why is HUD so helpful? Well, keeping people out of foreclosure is a decent and honorable thing to do. And, also, there is the little matter of cash. HUD is on the borrower’s side, financially. The reason is that the FHA mortgage loan program is an insurance plan. Fewer foreclosures mean fewer claims paid out to lenders. It’s in HUD’s interest to keep down foreclosure numbers.

Full post as published by FHA Mortgage Guide on June 29, 2010 (boomark / email).