The Next Big Clip

Cited: Reuters

There is one quarter of Los Angeles as a fertile ground for mortgage rescue scams.  That is Sun Valley.  This sun-baked area of Los Angeles has a high portion of subprime borrowers with a sharp drop in home values as well as many Spanish speakers.  This makes it a prime location for the homeowner education campaign that was launched October 26 by the US government, local agencies and housing advocates to help stop scammers from swindling desperate homeowners nationwide.

Officials do not know how many scams have been perpetrated among millions of American families who have lost their homes or face foreclosure. But they do know that scams exacerbate the foreclosure crisis because borrowers lose precious time and money that could have kept them out of default.

Some of the places with the highest subprime loan and foreclosure rates also have the biggest scamming industries — like Los Angeles, where Mayor Antonio Villaraigosa rolled out the “Loan Modification Scam Alert” campaign with federal agencies like the Federal Trade Commission and the advocacy group NeighborWorks America.  I’m

In coming weeks, the campaign will go to other hard-hit areas like Miami, Florida, and Columbus, Ohio, and it will target those groups most affected — senior citizens, Hispanics, African Americans and Asian Americans.

While tighter regulation and law enforcement are expected to reduce scamming operations, officials say they expect the best results to come from the first line of defense — better educated borrowers.

“If you can stop people from going, then you don’t need to worry about enforcement,” said Eileen Fitzgerald, chief operating officer of NeighborWorks America.

Tom Syta, assistant director of the FTC’s Western Region, believes education makes a bigger dent against scamming than law enforcement “because when law enforcement steps in, the money is gone.”

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NO MONEY UP FRONT

One of the most common complaints among rescue scam victims is over attorneys who collected money up front and offered guarantees of modification, only to deliver nothing.

Zulma Navarrete, an immigrant from Guatemala, paid an attorney $3,500 to get help reducing mortgage payments on her Los Angeles home. The attorney never came through, though Navarrete did get her payment cut in half by working with a nonprofit group and her lender.

California law now prohibits up-front money for loan modifications, but many continue to fall prey to the practice, often at the hands of the same brokers who sold them sub-prime loans in the housing boom.

In the new campaign, teams dressed in the colors of caution — yellow and black — fan out across neighborhoods and distribute fliers with the instructions to avoid anyone who asks for a fee in advance, guarantees a loan modification or says to pay them instead of paying the mortgage.

In Los Angeles, campaigners speak English, Spanish, Vietnamese, Chinese and Korean. And they encourage people to call a 24-hour hotline or visit the site www.LoanScamAlert.org for advice and to report scammers.

Martha Jimenez, a community counselor in Sun Valley, welcomes the warning against scams, but says the government and nonprofit groups have to do a much better job in coming to the rescue of borrowers in distress.

“They call us back, very angry, because they get no help,” said Jimenez. “Many have stopped believing in these pieces of paper.”

Jimenez tries to help senior citizens who mostly speak Spanish and whose adjustable mortgage rates reset.  Being reset are monthly house payments of $1500 that go to $4000 a month while their homes drop in value.  She then directs them via fliers to government and nonprofit offices that can help them.

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My Take: In a way, I can understand why someone scams a person who is rich.  I do not think it is right, but I can understand it a little bit.  But I cannot understand someone who cheats people who have barely enough money to survive on.  I do not know if think I ever will understand that.

If a person puts up their hard-earned money for construction estimating software to build their own house, you would think they’d be able to hang on to it.  Yes, I understand that most of the people that are being scammed purchased pre-built homes.  But some of them actually used blueprint software to get an idea of what they wanted in the first place.

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