Foreclosures and mortgage delinquencies in Washington State are increasing as borrowers with adjustable- rate mortgage loans see significant increases in their loan payments amid declining property values.  The Attorney General’s Office is working to help  Washington residents by cracking down on mortgage fraud and deceptive offers to help those in need. We are strengthening Washington's laws and reaching out to the public to warn them about equity skimmers, bogus “foreclosure rescue” scammers and deceptive loan modification programs before they end up in a worse situation.

What to do if you are facing foreclosure or can't pay your mortgage
Warning about scams: loan modifications and foreclosure rescue services
How the Attorney General's Office is addressing the foreclosure problem
Resources

IF YOU ARE FACING FORECLOSURE OR CAN'T PAY YOUR MORTGAGE:

• Contact your lender. Your lender may be able to temporarily reduce or suspend your payments or help you refinance with a new loan and better terms. Print and complete this checklist of information you will need to have available. Contact information for lenders, loan servicers and Washington state banks and credit unions is available here. Write down who you spoke to, the date and what was said. Use registered or certified mail in any correspondence on legal matters.
• Talk to a housing counselor. They are trained to help you explore your options. View a list of free, state-sponsored counselors. 
• Don't walk away. Even if you lose your home, you may receive money. The market value of your home have increased since you purchased it. Any unpaid loans or taxes will be withdrawn from the sale price of the house, as well as fees related to the foreclosure process. Whatever money is left after those debts are cleared up is rightfully yours. If you have abandoned the home, you may not receive this money.
• Consider alternatives to foreclosure.
• Scroll down for more resources, including free legal help.

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BEWARE OF SCAMS!

In this time of rising mortgage rates, desperate homeowners have been lured by offers of assistance – only to be cheated out of equity they’ve built up, tricked into transferring ownership of their home or stuck paying expensive fees for little or no help.

• Loan Modification Scams
  A loan modification is a written agreement with your lender or loan servicer that changes the original terms such as the interest rate, payment amount, principal or maturity date. You may see advertisements offering you loan modification assistance or be solicited by phone or mail from someone offering such services. Some of these companies have Web sites that look official or make it appear that are a government agency. Be cautious before hiring anyone to help you obtain a loan modification.
  • A number of businesses that claim to offer loan modifications are really looking to make a buck.  Scammers ask homeowners for an upfront fee then provide services that the homeowner could have received for free through a nonprofit organization or from their lender. Sometimes, they provide no help at all. In most cases, it is illegal to collect a fee in advance for such assistance.
  • Be especially wary of anyone who asks for your bank account information in order to withdraw funds before they provide service.
  • Many loan modification companies are guaranteeing success rates of 90 percent in higher in negotiating loan modifications. We think promises like this are probably too good to be true. The reality is that lenders will not agree to a loan modification in every situation.
  • The Washington State Department of Financial institutions  requires that any provider offering loan modifications be licensed as loan originators, mortgage brokers, or consumer loan companies.  If you choose to go with a loan modification business, verify they have a license by checking the DFI Web site at www.dfi.wa.gov or by calling 1-877-RING-DFI.
  • Scroll down for resources, including free help.
    
• Foreclosure Rescue Scams (¡Sea consciente de Estafas de Rescate de Ejecución de Hipoteca!)
  Scammers approach homeowners promising to help them keep their homes but instead take the owner's money, home or equity. Homeowners  frequently do not understand the transaction.  These scams can take several forms:
  • Phantom help: In this scam, the supposed rescuer charges very high fees and claims he can negotiate a deal with your lender. You may be told not to contact your lender, lawyer or a credit counselor and to let the scam artist handle all the details. You receive no real help or too little, too late.
  • Rent-to-buy schemes: Scammers lead homeowners to sign over the deed to their property by promising to sell the home back once the homeowners get back on their feet and allowing them to remain in the home as tenants in the meantime.   In the end, of course, the homeowner can't buy the house back and the supposed rescuers get most, if not all, of the equity. Sometimes the rent is set so high that the homeowner can't afford the new payments and is evicted.
  • Bait-and-switch:  Swindlers tell the victim that they are signing documents for a new loan that will solve their problems. In reality, they are signing documents that will give the crooks ownership of the home. To make matters worse, the victim still owes the mortgage.
  • Check out this video, Foreclosure Scams 101, produced by Freddie Mac for further explanation:
    http://www.youtube.com/AvoidFraud

  ATTORNEY GENERAL'S OFFICE EFFORTS:

• Partnerships:
  • In June 2007, the Attorney General’s Office convened a Foreclosure Think Tank with the Washington Bar Association and the Northwest Justice Project to look at issues surrounding foreclosure. The think tank brought together representatives from government agencies and nonprofit organizations, private attorneys and industry professionals.
  • We’ve met with foreclosure and homeownership counselors certified by U.S. Department of Housing and Urban Development (HUD) across the state to learn firsthand what kind of experiences they are seeing and to ask for their ideas on ways to help borrowers in trouble.
• Legislation:
  • During the 2007-2008 legislative session, the Attorney General’s Office requested a law (RCW 61.34.020) to reduce foreclosure rescue schemes that include an option to buy or lease back the property. This new law requires a written contract with clearly disclosed terms to be completed by the homeowner and the purchaser prior to the property’s transfer. It also requires that the homeowner must receive at least 82 percent of the difference between the property’s fair market value and the underlying mortgage in the event of a sale to a third party. New legislation, approved by the Legislature in 2009 and jointly requested by our office and the state departments of Licensing and Financial Institutions, exempts real estate brokers from the law and allows those simply offering to buy the home within 20 days of foreclosure to make the purchase. The change ensures that any homeowner who wants to sell their home rather than face foreclosure is able to find a real estate agent.
• Enforcement:
  • In October 2008, the Attorney General's Office settled an action against Countrywide for loan practices that pushed many Washington borrowers into or to the brink of foreclosure.  A significant part of that settlement is aimed at modifying many Washington loans in order that homeowners can avoid foreclosure. The office also took a leading role in a $325 million nationwide settlement with Ameriquest in 2006 and a $484 million settlement with Household International reached in 2002; both cases involved allegations of widespread mortgage fraud.
  • The Attorney General’s Consumer Protection Division has brought civil suits against several businesses and individuals that promised to help save homes from foreclosure (for a fee) but then failed to do so.
• Federal Work:
  • McKenna joined 22 other attorney generals in an effort to convince Congress to loosen bankruptcy rules so judges can modify home loans to help reduce foreclosures. They sent a letter in January 2009 asking Congress to allow the bankruptcy courts to order loan modifications.
  • The Washington State Attorney General’s office plays a leading role in the State Foreclosure Prevention Working Group, a coalition of state attorneys general and state banking regulators, formed to identify strategies to prevent unnecessary foreclosures. The working group has approached every major loan servicer on behalf of struggling borrowers. The group also sent a letter in February 2009 urging federal officials to encourage national banks and federal thrift-servicing operations to modify mortgage loans that are becoming unaffordable for consumers.
  • A smaller number of attorneys general, including Rob McKenna, are part of a new group called the Attorneys General and State Banking Regulators’ Federal Preemption Working Group. They are working with the U.S. Comptroller of the Currency to get more authority for the states.
  • On a related note, Washington State Attorney General Rob McKenna moderated the panel, “The credit card crisis: the next shoe to drop?” at spring 2009 meeting of the National Association of Attorneys General.
• Prevention:
  • The Attorney General's Consumer Protection Division sent letters in fall 2008 to more than 14,000 properties that may be facing foreclosure because of missed mortgage payments. The letters warn homeowners about foreclosure rescue scams. County treasurers include a warning from the attorney general along with the certified foreclosure notices mailed to those who have neglected to pay property taxes.  If you have additional questions regarding the letter, please contact the Consumer Protection Division at 1-800-551-4636 between 10 a.m. and 3 p.m. weekdays. ( Spanish translation.)

RESOURCES

• Visit www.homeownership.wa.gov or contact the Washington State Homeownership Information Hotline at 1-877-894-HOME (1-877-894-4663). Provided by the state Department of Financial Instituations and the Washington State Housing Finance Commission. Includes list of free, state-approved housing counselors.
• Homeowners in need of legal help who are unable to afford a lawyer should contact the Home Foreclosure Legal Aid Project. Call 1-877-894-HOME (4663).
• Homeownership Preservation Foundation's national hotline: 1-888-995-HOPE. Provides free, bilingual, personalized assistance to help homeowners avoid foreclosure.
• Federal government Making Home Affordable program: Determine if you're eligible for refinancing or a loan modification through these federal programs.
• HUD-Approved Counseling Agencies - Housing counseling agencies in Washington who give foreclosure advice for free or at a low cost.
• U.S. Department of Housing and Urban Development - Primary site for federal housing assistance and information.
• Federal Reserve Board - Foreclosure Resources - Information and links to agencies that might be able to help you avoid foreclosure.
• Avoiding Foreclosure - Information from Freddie Mac on how to avoid foreclosure.
• Mortgage Payments Sending You Reeling? - Information from the FTC on what to do if you’re behind in your mortgage payments
• Get Above Water - Information from AARP on what to do if you are struggling to make mortgage payments
• Seattle/King County Coalition for Responsible Lending - Information and materials for homeowners, housing professionals and others who would like to prevent predatory lending
• Countrywide settlement information - If you hold a Countrywide mortgage, you can find more information about whether or not you might be eligible for relief through this settlement on Countrywide's Web site or call 1-800-669-6607. 

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