Here's another interesting report of a mortgage scam. This one is out of Salt Lake City: KUTV.

And more detailed report on what's going on in Illinois.

Finally, here's something that I fear we'll be seeing more of in the months and years ahead. In a Kansas City federal court, a former loan officer and a former real estate appraiser were sentenced for their part in a mortgage fraud scheme. They would help consumers get inflated mortgages by using inflated appraisals. Both got five years probation and both have to pay more than $1 million in restitution. The loan officer worked for Ameriquest Mortgage, a company which has agreed to pay the Commonwealth of Massachusetts millons in restitution for similar practices which ultimately left homeowners with debt they could not handle.

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The LA Times reports this week that as foreclosures rise in Southern California, so do incidents of foreclosure fraud.

Check out what's going on in Illinois.

The US Department of Housing and Urban Development has helpful information on mortgage scams.

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There’s nothing that incenses me more than the misinformation (…or perhaps better said, outright lies) that are being told about the new bankruptcy laws. I came across a press report posted on the website for WKOW out of Madison, Wisconsin. It’s bad enough when a reporter gets the facts wrong, but it’s even worse when their source is similarly wrong.

The most glaring untruth is the quote reportedly from Michael Gutter, a University of Wisconsin Extension Financial Specialist: “There's a new needs-based test put into place on chapter 7 that will essentially eliminate most middle-class families from being eligible for bankruptcy.”

The fact is, a means test is applied to those seeking bankruptcy who have mostly consumer debts. The means test does not eliminate bankruptcy eligibility. In theory, it is designed to determine whether the filing of a Chapter 7 petition by those who (from a bankruptcy attorney perspective) “fail” the means test raise a “presumption of abuse.”

There’s not enough room here for me to discuss all of the factors which can help a debtor overcome the presumption of abuse. Suffice it to say, the “presumption of abuse” does not result in the doors of the bankruptcy court being locked for needy and honest debtors.

Gutter also reportedly states: "Prior to filing for bankruptcy, families will need to complete financial education and those being moved into chapter 7 or 13 will need to work with a financial counselor to actually establish that repayment strategy." First, prior to filing bankruptcy, debtors (not the families, which implies the kids have to do it as well) need to go through credit counseling; a subject I have discussed in a number of articles here. The debtor education requirement takes place after the filing, and is a requirement that debtors need to fulfill to obtain a discharge.

As for “…working with a financial counselor to actually establish [a] repayment strategy…”, I can only assume that this refers to the pre-bankruptcy credit counseling requirement. While in theory, part of the credit counseling process is an examination of income, expenses as well as assets and liabilities, the fact is there is no requirement to establish some repayment strategy….and frankly, virtually all people try a number of repayment strategies which ultimately fail…which is why they are contemplating bankruptcy. The statement also ignores the NACBA study which decried the credit counseling requirement as, among other things, an ineffective deterrent to bankruptcy filings.

The Myths

Finally, there’s this gem. Gutter reporting states: "We'll see a lot more people trying to take responsibility and be proactive about their credit, realizing that bankruptcy is no longer an option that it was for many individuals. The impact, of course, for all bankruptcy is that it will appear on your credit report and significantly impact your credit score for up to seven years." Let me start with the credit report claim.

Bankruptcy can appear on the credit report for up to 10 years, not 7. Can it impact the credit score? Sure. In some cases, it can actually help it. Whether it has a “significant impact” largely depends on what the debtor’s goals are, and it largely depends on the lender who is considering the credit.

If the debtor wishes to obtain a no-money down mortgage within six months of the bankruptcy, the bankruptcy is likely to have a significant “negative” impact on how the lender views the credit report. But if the debtor wishes to obtain a mortgage within a few years after bankruptcy, after the debtor has been able to save for a down payment, and after the debtor has demonstrated credit worthiness (such as by continuing car payments), the bankruptcy is likely to have a “positive” or even a “neutral” impact on how the lender views the credit report. Additionally, the availability of money to borrow is also a factor that no consumer can control. Ultimately, such a broad based statement standing alone only perpetuates the myth that bankruptcy is not a viable option.

But the most galling statement – and one that sticks in my craw – is that “we’ll see a lot more people trying to take responsibility….” Oh please. As most of the people that come into my office to see me, at least one of three things happened to them: a medical problem, a job loss or a divorce (or death of a spouse or income earner). Of course, there are others who file bankruptcy: people who get scammed, people who get their identities stolen, and people who are the victims of predatory lending practices. In virtually all of these situations, the cause of the bankruptcy was beyond their control, or was something that could only be seen in hindsight. Dropping such buzz-words as “responsibility” is a feeble and transparent attempt to guilt people into paying debt that they simply cannot afford. There, but for the grace of God, Mr. Gutter.

I welcome a healthy debate based on accurate facts. But when press reports that are designed to inform people struggling with debt are laden with untrue facts and myths as well as a dose of righteousness, don’t expect me to sit quietly.

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An old client called today to tell me about a problem he was having with a bill collector. It seems he fell behind on their credit card payments, and the credit card company sent the account out to two different collection companies who took turns calling (or harassing) the client.

While on the phone with one of the collection companies, the client offered to pay some money towards the account and asked for an address to where the check should be sent. The response was “we’ll settle it today for ‘x’ amount.”

The client jumped at the chance to get these boneheads off his back and off his phone.

“I’ll accept," he gleefully responsed. " Where do I send my check?”

The response:

“We don’t want your check. We want your bank account information and we’ll do a transfer.”

Smell a rat? I did and you should.

More and more I am seeing this tactic. Collectors aren’t sending out dunning letters. Instead, they are just calling and demanding bank account information.

Yet consumers should note: never, ever give your bank account information to a collector (or for that matter, anyone else you do not know). Giving them your bank account information can lead to collectors taking more than you authorized and making it difficult, if not impossible to get it back. It is not unheard of for a $50 payment to turn into $500 (“…perhaps it was a key-stroke error). In addition, without something in writing, you can expect that the collection company to succumb to an unfortunate bout of amnesia when asked about whether the amount removed from the account actually amounted to a “settlement” of the entire amount due. Your idea of settlement and their idea of settlement might not be the same.

Pay by check. Write the account number on the check. Get the settlement offer in writing. Don’t accept threats like “….if we do not get the bank account information the deal is off.”

Bottom line: the high pressure demand for bank information is little more than one more tactic from commission driven bill collectors trying to make their numbers. Any settlement should be in writing, and any payment by a check should be acceptable. Any bill collector obeying the law should not have any problem with that.

Any bill collector that does is free to send me an email and tell me why I'm wrong. I'll post it here.

Posted by Bill McLeod at 7:41 PM | Permalink | Comments (0) | TrackBacks (0)

Another person wrote to me letting me know about the missive they received in their mailbox:

"Within my hand, this mail-merge Post Card I've recently received from Kensington Assistance Agency; 1357 Broadway, Suite 260; New York, NY 10018;..... I must express to you my gratitude for your efforts. Though Kensington offers me a $5,000 to $50,000 grant to pursue my further Education, Degrees, Manuscripts, etc., the $299.97 fee one must question. The card indicates a "free" application, etc. Fraud one may clearly sense. Thank you."

Funny, I haven't heard from anyone at Kensington Assistance Agency yet.

Posted by Bill McLeod at 7:30 PM | Permalink | Comments (20) | TrackBacks (0)

Today's Christian Science Monitor reports on the continued growth of predatory lending in Boston’s minority neighborhoods. The article also lists out warning signs of a predatory loan.

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A few days ago, I warned readers about Kensington Assistance Agency. The RIP-OFF ALERT! followed a call I received from someone who was facing foreclosure of their home, and was fairly convinced they were awaiting approval for a government grant that would get them caught up on their bills. Kensington sold the grant scheme to the homeowner for almost $300.

Today, I receive an email from a reader from another state:

"Thank you for the alert about Kensington Assistance Agency. I received one of their post cards telling me that I had been identified as a possible qualifier for a government grant. When I called the number, they ask me many questions among those was the name of my bank, account number and social security number. I did not give them the information and ask why they needed this data. The lady became argumentative and I hung up. Thanks for alerting the public about these scam artists."

I am thrilled the reader was able to avoid the scam. But despite the warnings here, and in other places on the web, Kensington is still slithering out there preying on folks. If you get one of these postcards, please contact the consumer protection division of your state attorney general’s office to file a complaint.

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The Federal Trade Commission and the Attorney General for the State of Washington are seeking an injunction against Debt Solutions, Inc., as well as three other individual telemarketers in Washington and Florida.

Debt Solutions, Inc. along with the individuals and related agencies are alleged to have made unsolicited telemarketing calls nationwide touting a “debt elimination program.” It is also alleged that they falsely represented that they have a “special relationship” with creditors which would enable them to negotiate substantially lower credit card interest rates. But according to the complaint, those who got into the program did not see a significant reduction in interest rates, if any.

The Defendants are also charged with phoning individuals on the “Do Not Call Registry.”

The Defendants also marketed these services on the web at Accelerated Financial and DSI Financial.

If you believe you were ripped off by Debt Solutions, Inc., or any one of the companies noted in his suit, contact a consumer protection attorney in your state or your local attorney general’s office.

You can read more about the suit here.

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I discussed on January 26 the need to obtain a “ticket” into bankruptcy court: the certificate from an approved credit counselor. As the new bankruptcy laws continue their evolutionary trek through the nations courts, another case has popped up that should serve as a warning to all folks facing foreclosure. Since foreclosure rates are creeping to multi-year highs, it’s important to heed this warning.

The Bankruptcy Appellate Panel for the 8th Circuit (which includes Missouri, the Dakotas and Arkansas, among other states) ruled on February 16, 2006 that even though the debtor could demonstrate he was facing “imminent foreclosure” that was not enough to show an “exigent circumstance” which would warrant a waiver of the credit counseling requirement.

In this case, the debtor told the bankruptcy court that his house was scheduled to be auctioned at 12 noon on November 10 – the same day he filed his petition. He did not contact a bankruptcy lawyer until 6:30 pm on November 9. The debtor did not have internet access, and when he called an approved credit counselor he was told it would be two weeks before he could receive counseling on the phone. The bankruptcy court found that this was not enough to waive the “ticket” into bankruptcy court, and dismissed the petition.

In addition to noting other cases from other bankruptcy courts in the country that have ruled on the issue, the Appellate panel noted that the bankruptcy court had also relied on a local state law which requires twenty days notice before foreclosure: “[i]n the face of that much notice of the impending foreclosure sale the bankruptcy court determined that his exigent circumstances did not merit the waiver of the prebankruptcy briefing requirement. We cannot say that the bankruptcy court abused its discretion in making that determination.”

Homeowners, take note: In Massachusetts, the foreclosing mortgagee is required to publish a notice of the sale at least 21 days prior to the sale. But even before then, the homeowner will have received a letter from the mortgagee’s attorney. In other words, mortgage sales generally don't just happen overnight.

Like it or not, the prebankruptcy credit counseling requirement is here for the foreseeable future. There can be little worse than learning that the option of a bankruptcy petition has been ruled out because an important requirement has not been fulfilled. Financially distressed homeowners should be calling bankruptcy attorneys at their earliest opportunity – and not the night before the auctioneer’s hammer is about to come down. Keep open all available options: plan now, or pay later.

You will find the case here.

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According to a survey released by the National Retail Federation, most people (46.7 of those responding) receiving tax refunds will be using it to pay down debt, although fewer younger adults will be using their refunds to pay down debt.

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I am not an economist, nor do I pretend to be. An economist from the Mortgage Bankers Association tells the Boston Herald that the factors that are contributing to the rising foreclosure rates in Massachusetts include high home heating costs. While I do not doubt this, I do not hear too many people blaming the "oil man" for their financial problems.

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Today I received a call from someone facing foreclosure. They were not employed, had difficulty finding work, but told me that they had “applied for a grant” and if they received the “grant”, they would be able to cover their mortgage deficiency.

This heightened my interest since I do not know about any grants available – and that’s information I can pass on to other people in the same situation. So I asked about it.

The caller told me “I paid them $299.97 and they will get back to me.” I was then told that the payment was not in the form of a check, but bank account information (routing and account number) as well as the social security number were given over the phone. The red flags went up in my head.

While I had the caller on the phone, I did an internet search. The search results were not positive.

Rip Off Report.com listed at least two separate complaints about Kensington.

Scam.com also had a posting from someone who was almost swindled by these clowns.

The local Better Business Bureau has an unsatisfactory record from Kensington Consulting Group which has the same address as the “Assistance Agency."

It comes as no surprise to me that folks in debt might want to try getting a grant before even calling a bankruptcy lawyer. While I might be friendly, personable and an otherwise nice guy, I think many people would rather make a long over due appointment with a dentist than to sit down with me and talk about filing bankruptcy.

But relying on parasites like Kensington is only going to make financial problems worse. Not only had the caller paid $299.97 to them, but they were planning on paying another $299.97 for a “reapplication.” Now someone who is facing losing their home is out $299.97 (possibly more), and has to close bank accounts. Injury, meet insult. Insult, let me introduce you to injury.

The bottom line: No grant application should be costing a consumer almost $300. And no invitation to apply for a grant application should arrive on a mass-mailed postcard. In most cases, the adage that “if it sounds too good to be true, it probably is…” proves itself to be accurate.

Unfortunately, there are other scumbag companies like Kensington out there. When I learn about scams, less than honorable companies and just plain ol’dirtbags that are preying on people struggling with debt, I am going to make sure I talk about it here. So check back often.

Of course, all is fair. If those companies want to respond, I encourage them to do so. Send me a letter, and I’ll be sure to scan it in and post it on the site.

Until we hear from them, Kensington Assistance Agency has a McLeod Law Offices Rip Off Alert!

Posted by Bill McLeod at 12:43 PM | Permalink | Comments (32) | TrackBacks (0)

ForeclosuresMass has released foreclosure statistics for the Commonwealth, and the news isn't something to sing about. Suffolk County alone has seen a jump of more than 50% over last year. The Cape - where I grew up - is also getting hit with higher foreclosures. Both Barnstable County and Nantucket are seeing increases of 40% over last year.

Read the report here.

And things are not getting any better for our neighbors in New Hampshire.

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Default Research is reporting today that foreclosures are up in Southern California. Apparently Sunny San Diego has the highest rate - and interestingly also has some of the most expensive homes in the country.

Last year, I had the pleasure of going to San Diego for the annual convention of the National Association of Consumer Bankruptcy Attorneys. I stayed an extra day to check out the local scene (and of course, go to their zoo), and discovered that the price for fairly modest homes in the area started at around $750,000.

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Following up on my March 1 note, foreclosures are up 25% in Broward County, Florida according to a press release by Default Research. I have to admit, I do love Ft. Lauderdale and have met many great local folks there. While this press release is pretty short on facts as to the reasons why the foreclosure rates are up, I know from some of the locals that it was very difficult getting back on their feet after the hurricanes of the past few years.

The news out of Ohio is also not so great for homeowners in Stark County and Montgomery County.

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Most realtors and incumbent politicians are not likely to agree, but an AP report that was just released within the past couple of hours suggests that the housing market is slowing down, and the effects will ripple through the economy.

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Notwithstanding the fact that some bankruptcy attorneys (including me) think that the bankruptcy credit counseling requirement is a joke (and I'll explain why on another day), it's still a necessary prerequisite to get an entry ticket into the bankruptcy court.

You can read more about the "mixed reviews" that bankruptcy credit counseling is getting here

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I do not want to be a Negative Norman (the distant cousin of Debbie Downer) but I am getting real sick of reading about how strong the economy is especially when I am getting calls every day from folks fearing the loss of their home. Foreclosures appear to be going up and my ringing phone is not the only clue.

According to a press release issued this morning by ForeclosuresNH, a foreclosure reporting service in New Hampshire, the percentage of foreclosed properties in the Granite State that were purchased or refinanced in the last two years has gone from 28 percent to 52 percent. The increase is apparently traced back to homeowners who could not get traditional fixed rate mortgages, and instead were able to obtain financing for their homes with interest-only, adjustable-rate or discounted-rate mortgages. ForeclosuresNH also concedes that another factor contributing to this trend is a (for now) slowly cooling housing market.

Earlier this week, WLNS News 6 in Lansing, Michigan reported that foreclosures in that state have doubled in the past year. That’s right. Doubled.

Is it a trend? Based on the way my telephone has been ringing lately, I have to wonder. So I have decided that as I run into news about foreclosure rates nationwide, I’ll post it here. If you have news or questions you want to share, feel free to send me a note by clicking “Contact Us” in the margin to the right. If you have any thoughts you want to share on what you think is going on with the housing market, feel free to share those with me too.

Keep checking back.

Posted by Bill McLeod at 6:52 PM | Permalink | Comments (0) | TrackBacks (0)