Question: I am having trouble paying my mortgage. One of my friends suggested I hire a mortgage rescue service she found on the internet. Is that a good idea?
Answer: There is an old saying that misery loves company. Unfortunately, that company often turns out to be the company of crooks.
Over the past few years, Florida's Attorney General has received complaints on hundreds of foreclosure rescue businesses and has opened active investigations into many of them. One of the worst involved Florida based National Foreclosure Management, which stole 1.7 million dollars from at least 80 home owners. National Foreclosure Management, which changed its name to American Home Rescue, Inc., preyed on home owners who had substantial equity in their home but were facing foreclosure. The company convinced the home owner to deed title to the company so the company could refinance the debt, provide cash to the homeowner and repair the homeowner's credit. Once the company took title, it refinanced to suck out the equity and kept the money for itself.
In 2008, Florida's legislature adopted new Section 501.1377 of Florida Statutes. The new law prohibits foreclosure rescue services from collecting payment until all services have been completed. The law also requires a written contract for foreclosure related rescue services be signed by both parties. The homeowner has three (3) business days after signing the agreement to cancel and the right of cancellation must be clearly stated in large type immediately above the signature line. Even more notice is required when the homeowner is signing over title to the rescue company and any repurchase price must not be unconscionable.
That was a good start, but the legislature wasn't finished. In 2009, the legislature amended Chapter 494 of Florida statutes. That chapter deals with loan originators and mortgage brokers. It now defines a loan originator to include any person who negotiates or offers to negotiate the terms or conditions of an existing mortgage loan on behalf of a borrower. That means negotiation of a mortgage modification or assistance with a short sale requires licensing as a mortgage broker with Florida's Office of Financial Regulation if a fee is charged. There is an exemption for attorneys representing clients and negotiating short sale or loan modification as part of that service.
There is no exception for title companies. Accordingly, a title company cannot negotiate a short sale or mortgage modification and charge a fee or even ask for reimbursement of its costs. On the other hand, the Attorney General has opined that a licensed Florida real estate agent may negotiate a short sale and mortgage holder agreement to accept less than full payment in exchange for release as long as the negotiation is part of the property sale process and the sales agent is only paid his or her commission, with nothing added for negotiating with the mortgage holder.
That means your legal choices for negotiating a loan modification with your lender are basically your attorney or a licensed mortgage broker. If you are attempting to pursue a short sale, your options are basically to rely on your Florida licensed sales agent and/or retain an attorney.
Even though the promises of mortgage rescue might bring you hope, recent history is full of cases where these companies have taken the money and run. Your best choice would be to retain an experienced attorney. If you are still considering using one of the services, I suggest that you have your attorney review all of the documents and licensing before you make a final decision.