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Mortgage Scammers Prey on Strapped Homeowners

So-called rescue firms promise to negotiate lower rates, then take money and run

By John Johnson, Newser Staff

Posted Sep 24, 2009 7:50 PM CDT

(Newser) – Mortgage brokers who made a mint during the housing boom setting up homeowners in toxic loans are now profiting from a different sort of shady deal. So-called foreclosure rescue firms are proliferating across the US, taking money upfront and promising to negotiate with homeowners’ banks for better interest rates. Instead, they mostly take the money and run. And so far, states have been largely powerless to stop them, reports Pro Publica.

States use lawsuits to fight back, but companies simply change names or ignore court orders altogether. The Federal Trade Commission is considering a rule change to help the cause, but meantime, complaints are soaring. “For people who are desperate, who’ve tried and tried to contact their servicer, this type of scam can get some traction,” says one bankruptcy lawyer. “At least you’re talking to a real person.”

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A file photo of a foreclosed home in California. (AP Photo/Paul Sakuma, file)

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The mortgage brokerage business dried up, and so the same loans that they went out and originated, they’re coming in to try and modify. - Thomas McNamara, who is investigating US Foreclosure Relief

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Mortgage Scammers Prey on Strapped Homeowners