Houses in Maryland and elsewhere are being stolen from their owners through foreclosure "rescue" schemes that suck equity out of homes or gain title to residences, sometimes without the owner's knowledge, according to a report released yesterday by a consumer advocacy group.
"Most victims simply don't realize they are being scammed even when they lose their homes," according to the report, Dreams Foreclosed, by the National Consumer Law Center in Boston. "They think that's just the way foreclosure works and that nothing more could have been done, a perception often happily reinforced by the people ripping them off."
The consumer group said companies prey on cash-strapped homeowners about to lose their homes in foreclosure by promising to save their houses. The group estimates there are thousands of perpetrators and many thousands of victims, said Steve Tripoli, co-author of the report, which looked at cases in 17 states and Washington.
Some experts say there are legitimate foreclosure consultants to help consumers but that the number of bad ones has risen as home values have soared in recent years.
Last week, Maryland Gov. Robert L. Ehrlich Jr. signed legislation designed to protect homeowners from similar deceptive foreclosure practices.
"It's a growing problem" in Maryland, said Doyle L. Niemann, an assistant state's attorney in Prince George's County and a House Democrat involved in the legislation. "I have a number of cases that have come before me and could have a lot more where people have been defrauded out of their houses."
Typically, "rescuers" find homeowners through public foreclosure notices. They phone, send fliers or show up on the doorstep with an offer to help homeowners remain in their homes.
Basically, victims have reported three types of deals, according to the National Consumer Law Center.
Sometimes, a "rescuer" offers to negotiate on behalf of the homeowner with the mortgage company, charging hundreds of dollars in upfront fees but providing little assistance.
The second type is a "bailout" in which the homeowner agrees to surrender title to the house with the intention of remaining as a renter and buying back the house eventually. The terms are so unfavorable that homeowners can't meet them. The home is sold and the equity drained by the so-called rescuer, Tripoli said.
Then there are cases in which homeowners believe they are signing loan documents, expecting to use the money to bring their mortgage payments up to date, the report said. Instead, they have signed over their interest in the house.
Niemann said these companies spend a few thousand dollars to bring the mortgage current, then sell the house and pocket the profit. "This is the way to get rich quick," he said. Worse, he said, "the original homeowner is still on the hook for the original mortgage."
Two Maryland women said they have been victims of such practices. Both testified during this year's session of the General Assembly.
Wanda Walker said she was behind about $10,900 in mortgage payments in November 2003 when fliers started appearing on her Fort Washington doorstep offering to help.
Among all the offers, Walker chose Ronald C. Brown's RCB Group in Maryland because it made loans to troubled homeowners. She paid him about $400 to work on her behalf with the mortgage company. Besides dealing with the stress of pending foreclosure, Walker's former husband died.
She said she trusted Brown and, on the morning of the foreclosure sale, she signed some documents, including what she thought was a power of attorney so he could act on her behalf.
Not long afterward, Brown moved to have her evicted, presenting a quit claim deed bearing her signature that turned over the house to him, according to her lawyer, Ralph Sapia.
In July 2004, Walker was evicted from her five-bedroom house. She has been unsuccessful in court, losing in a jury trial a year ago.
Brown couldn't be reached for comment. His lawyer, Bryon S. Bereano, said he couldn't comment on the case because of continuing litigation.
In another Prince George's County case, Patricia Washington of Cheverly said she missed three months of mortgage payments a couple of years ago and was desperate to avoid foreclosure. A friend recommended a lawyer, who put Washington in touch with a "financial officer."
"I wasn't even thinking. I was crying. I was really emotional," said Washington, who cares for her parents, both in their 90s, who live with her.
Washington said she owed about $5,000 to the mortgage lender. She said she thought she was going to receive a loan but discovered later that she had signed over her deed to Vincent Abell, president of Modern Management Inc. in the District of Columbia. The company sued to evict her. When she attempted to get her house back, she was told she would have to pay $140,000, she said.
She is still in her home, and her dispute is to be heard in Circuit Court this month.
AARP Foundation Litigation, an affiliate of the advocacy group, filed a lawsuit against Abell, Modern Management and its agents, claiming they had tricked six Washington homeowners into giving up title to their house.
"I didn't trick anybody. I don't do business like that," Abell said.
In those cases, the contracts signed clearly stated that the homeowners were selling their houses, Abell said. "I don't make loans. I buy real estate."
Also in Patricia Washington's case, a copy of the paperwork was faxed to her lawyer for review, Abell said. Washington denies that her former lawyer reviewed the documents.
The National Consumer Law Center said states need stronger laws to protect consumers who may have few remedies. Maryland's law, modeled after Minnesota's, gives greater disclosure to homeowners and allows consumers the right to cancel a transaction within a certain time. It also requires the attorney general's office to prepare by the end of the year a list of nonprofits offering foreclosure assistance.
When facing foreclosure:
Seek information on the foreclosure process and its deadlines.
Don't sign a contract under pressure.
Don't sign away ownership of your house without your lawyer's advice.
Never make mortgage payments to anyone but your lender.
Avoid signing documents with blank lines that can be altered later.
Source: National Consumer Law Center