Landmark Mortgage Settlement May Inadvertently Increase Mortgage Scams

The U.S. Department of Justice and U.S. Department of Housing and Urban Development (HUD), in addition to 49 attorneys general, filed a $25 billion settlement in federal court on Monday - a settlement involving the nation's five largest mortgage servicers regarding claims of alleged foreclosure abuses. While the settlement still has to be approved by the federal judge, the Department of Justice called it "the largest federal-state civil settlement ever obtained."

The settlement, which was first announced last month, proposes various forms of mortgage relief, including:

  • Reducing the principal on loans for borrowers who are delinquent or are in immediate risk of default and underwater on their mortgages
  • Refinancing of loans for borrowers who are current on their mortgages but underwater
  • Forbearance of the loan principal for unemployed borrowers

The National Mortgage Settlement includes the lenders JPMorgan, Citigroup, Ally, BofA and Wells Fargo , and will hopefully bring relief to those homeowners most in need.

Avoid Mortgage Relief Scams

Although it will probably be months before the actual impact of the landmark settlement will be realized, reports of mortgage scams have already started. Con-artists are already taking advantage of desperate homeowners trying to hold onto their homes.

HUD has also attempted to nip these mortgage scams in the bud, but unfortunately they still continue to occur. Money Management International - a non-profit, credit-counseling agency - offers some of the following tips to avoid falling prey to mortgage relief scammers:

  • Try not to panic. Don't let your fear allow you to make a hasty or ill-informed decisions as scammer exploit this desperate fear.
  • Don't be pressured into a decision. Always research a company before disclosing any personal information or signing anything. After all, you can request information in writing if you are feeling any pressure.
  • Trust your instincts. If they are offering something that is "too good to be true," it quite possible is.
  • Don't release any personal financial information. It is possibly a scam if you are contacted by someone claiming to be from a financial institution and they ask you to confirm your identity with your personal information. Instead, ask them for their contact information and say you will contact them.
  • Know your rights. Make sure to get all information regarding mortgage foreclosure deadlines. In addition, if you want to know if you qualify for the Settlement, contact you lender directly.
  • There are no fees associated with the Settlement. If you are asked to pay for a quick resolution under the National Mortgage Settlement, you are being scammed.

As long as these scammers can get away with these schemes, innocent homeowners will continue to suffer. Homeowners need to be vigilant when looking for alternatives to foreclosure - you can never be too safe when your family's home is at stake.

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