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HOMEOWNERS BEWARE:

Foreclosure Rescue Scams

and the California Association of Realtors

Red Flags for Foreclosure Rescue Scams

HOMEOWNERS BEWARE:

Foreclosure Rescue Scams

If you are at risk of or in foreclosure, you should be on the lookout for foreclosure scams. Here are some of the red flags to watch out for:

• Asks for money upfront before providing any servicecounselor, family, friends, or others company or a bank account set up by that person, rather than your lender.or wire transfer circumstances her company over timehousing market at the time of sale

525 South Virgil Ave., Los Angeles, CA 90020 • www.car.org

Are My Taxes Paying
My Neighbor’s Mortgage??

 Last week’s long-awaited foreclosure relief effort from the Obama administration’s Housing Plan (see article on reverse side of the newsletter) will indeed help countless Americans, but has created resentment among those who either matched their income with their spending habits, or who prioritized their mortgage payments without asking for assistance from the government.

The logical question arising is, “Why should my taxes be used to help pay my neighbor’s mortgage? How will the bailout help responsible borrowers such as myself?” These citizens feel it’s unfortunate that the plan assists those who did not borrow responsibly or did not completely understand their mortgages when signing them. They also fear that their taxes may increase as a result of the bailout.

The administration’s plan has touched a significant nerve. There has been outrage, kindled by commentary from such pundits as CNBC’s Rick Santelli, who covers the commodity markets in Chicago. In an on-air rant, he called for a “tea party” this summer to protest the administration’s plan to “subsidize losers’ mortgages.” Then came some much-needed reason and clarification.

White House press secretary Robert Gibbs responded to Santelli’s attack by noting that many homeowners facing foreclosure won’t be eligible for help, including investors and people who “long ago knew they were in a house they couldn’t afford.” Instead the plan is targeted toward helping people “who aren’t yet in trouble keep from getting in trouble.”

Gibbs also pointed out that millions more Americans will benefit from the government’s effort to drive down mortgages rates, allowing homeowners who aren’t in trouble to refinance to a better rate and save money. Preventing foreclosures benefits anyone who owns a home by slowing the ongoing slide in home prices. Each new foreclosed property — sold at bargain prices — drives down the value of every other home on the street. This is information that those who initially reacted in anger and confusion should certainly be able to understand and be relieved.

According to a US Government Census statistic, there were about 75 million owner-occupied homes at the end of 2008. That means that the $75 billion being spent to prevent foreclosures at the end of 2008. That means that the $75 billion being spent to prevent foreclosures works out to about $1,000 per owner-occupied home. The bottom line is that $1,000 of your taxes spent should head off the potential loss of $20,000 on the value of your house. These days, that doesn’t seem like such a bad investment.

The New Housing Plan

President Obama's housing plan is expected to help as many as seven million to nine million homeowners by making it easier for them to either refinance their mortgages or renegotiate payments. The bill will remove the current restriction on Fannie Mae and Freddie Mac that prohibits them from guaranteeing refinancing on mortgages valued at more than 80% of the home's value. This will allow many more homeowners to refinance at lower rates.

Who may qualify?

Example — a family's home value drops to $400,000 from $475,000. The loan balance at $337,460 is now more than 80 percent of the home's value, making it difficult to refinance under current rules. Under the proposal, the family can refinance to a rate of 5.16% from 6.50%, which would save $331 a month and $3,968 a year.

Who does not qualify?

Those holding loans not owned or guaranteed by Fannie Mae or Freddie Mac. Also, mortgages above a certain threshold — $417,000 for single-family homes in most areas and $729,750 in higher-priced regions. Plus, those whose outstanding mortgage debt exceeds 105% of their current home’s value.

Helping renegotiate loan terms for "at-risk homeowners" — 3 million to 4 million households.

The bill creates incentives for lenders to modify the terms of subprime and other loans. Participating lenders will reduce payments to no more than 38% of the borrower's income, with the government matching further reductions down to 31%.

Who may qualify?

Example — a family's home value has fallen to $189,000 from $230,000 and its loan balance is $214,016. Job loss has reduced household income and loan payments can't be made. Under the proposal, the family could modify the mortgage for five years, so that payments are manageable. This would save $406 a month or $4,870 a year.

Who does not qualify?

Mortgages above a certain threshold — $417,000 for single-family homes in most areas and $729,750 in higher-priced regions. Also, homes that are not owner-occupied. Finally, those who apply more than three years after the program's start.

• Instructs you not to contact your lender, lawyer, housing

• Asks for mortgage payments to be made directly to his or her

• Requires payment only in the form of cash, cashier’s check,

• Promises to stop the foreclosure process, no matter the

• Advises you to transfer your property deed or title to his or

• Offers to fill out paperwork for you

• Asks for something to be done immediately and without delay.

This includes pressuring you into signing paperwork that you have not had the chance to read thoroughly or do not fully understand

• Encourages you to lease your house and buy it back

• Offers to buy your house for a fixed price that is not set by the

• Asks for you to give a power of attorney

• Asks for signatures on a grant deed or deed of trust

• Asks for signatures on a document that has lines left blank

• Fails to provide copies of signed documents

• Refuses or fails to put an oral promise in writing

Legitimate Resources

http://ag.ca.gov

• California Department of Real Estate

www.dre.ca.gov

• Department of Housing and Urban Development (HUD)

www.hud.gov

• Federal Trade Commission (FTC)

www.ftc.gov

• Your local Better Business Bureau

www.bbb.org