Mortgage Scams: the Option ARM Scam

Probably less so these days, but certainly a feature of mortgages past was the Adjustable Rate Mortgage, or the "ARM." An adjustable rate mortgage has a rate that changes with interest rates - theoretically.

When you purchase the loan, the mortgage broker, or the bank, smilingly tells you that the rate "can go up or down." As a consumer, excited about the details of your new home, you don't think too hard about the fine print. The fine print, however, explains that you rate adjusts not "every 5 years, before which time you'll have refinanced anyways" as your mortgage broker tells you - but every six months. That rate increase, you find, more than doubles the initial mortgage you took. Even worse, the rate seems to adjust every upwards.

While these days, the Massachusetts Attorney General has passed some pretty stringent regulations that should prevent this practice in future (or entitle the attorneys of those stupid enough to ignore the regulations to some hefty fees) that doesn't necessarily help people who were taken in prior to the enaction of the regulations.

What does help?

Mortgage Scams: the Mortgage "Modification" Scam

The second kind of scam that homeowners can experience after purchasing a loan involves an offer to modify the loan, made either by the loan's servicer, who probably has no intention of modifying the loan, or by a third party "modification assistance" company, which will offer to "help" with a modification. More details, after the jump.

The Mortgage Scam: Mortgage Rescue

This is the first in a series of posts about different ways that you can be scammed after  you have purchased a loan (as opposed to before-hand) by third parties, or your loan servicer.

This post is about my favorite kind of scam: the mortgage "rescue" scam. Why is mortgage rescue my favorite? I'll explain after the jump.

Overdraft This!

You've been charged with overdraft fees before perhaps... You remember, the $30 or so dollars you had to pay for each debit card purchase you made that weekend when your check didn't clear.

Congress has, blessedly, stepped in and decided to regulate this almost mean spirited area of banking - though the regulations won't kick in until July 2010. And besides, what about the money you lost in the mean time? ...I came up with a plan to help you get it back, which you can learn all about... ...after the jump.

Is a Short Sale Right for you?

As much as I love the prospect of sticking it to banks, I find that some clients are better served by holding what is called a "short" sale.

Those who would most benefit are people whose homes are underwater. The way it works, for those who don't know (yet) is that the bank agrees to take whatever the homeowner can get for the property. So if you owe $500,000, and the property couldn't get more than $400,000 on the open market, the bank might agree to wipe out the mortgage, and let you sell it to someone for $400,000 - which you will then give to them in satisfaction of the mortgage.

The problems with this are legion. First, often, people have two mortgages. So a certain amount of bickering occurs between junior and senior mortgage holders about who will receive what percentage of the sale. Second, if you have a lien on your property (like if you never paid your plumber or something) that person is still entitled to get paid from the sale proceeds. The problem is that there's a lot less money to play with now. Also, what about your real estate broker? She has to get paid by someone - and since the bank has all the power (to accept or deny) in this situation, that's who makes the rules.

Naturally, your property is much less attractive to purchasers, since, ironically, "short" sales often take a "long" time to close. Various contingencies will also likely attend any offer.

And if that weren't enough, many lenders have limited patience for a short sale, and will not abate foreclosure until a deal appears iminent. Huge national banks can be a real bear to work with, since one day you're talking to Tammy in Topeka, and the next you're on the line with Ed in Albequerque. 

Short sales are also probably not for people who still have equity in their homes, since that equity will likely be sacrificed to a purchaser looking for a deal.

Why Consumer Lawyering?

I practice consumer law, because I believe that customers need to be treated fairly. And because, under that umbrella, are a lot of abusive practices that can really lead to bummed out people. To quote Faith No More "I care a lot."

If your mortgage is in default, you are going to be more uptight than usual. If a stockbroker stole your money, you are going to be angry. Will you take it out on your spouse or your pets? I mean, how can I say? But it seems probable. People respond to stress.

Because I can provide affordable representation, my hope is that I can convince clients to "leave it to me" so they stop worrying, or stop being angry.

First Post Number Two

Those of you who are big fans of mine might have noticed that I have also just posted for the first time at Generally Counseling, my other blog.

I decided to maintain two blogs for two reasons. First, start up business counseling really has little to do with consumer litigation, and discussing them in the same breath seems incongruous. Second, perhaps unlike some other bloggers who maintain "professional" blogs, I am vain enough to believe that people might be interested in reading my writing for its own sake, and that, as such one or both sites might become a resource.