Rep. Elijah E. Cummings and housing advocates warned Maryland homeowners yesterday to avoid shady businesses that charge high upfront fees to avoid foreclosure.
Since the mortgage and housing crisis began widening last year, Maryland officials have tried to stem the tide of people losing their homes to foreclosure. Since September, officials said, they've seen a troubling trend of struggling homeowners turning to for-profit companies that offer so-called "loss mitigation consulting" or "foreclosure prevention."
But they emphasized that Maryland's Protection of Homeowners in Foreclosure Act requires that companies cannot charge consumers upfront fees for such services, which in some cases have been as high as $3,000.
They also noted that there are free state and federal programs that help consumers avoid foreclosure. There are also certified nonprofit entities, such as the St. Ambrose Housing Aid Center, where Anne Balcer Norton is the director of foreclosure protection.
"Anybody who preys on somebody when they are in pain ought to be punished to the fullest extent of the law," Cummings said at a news conference in Baltimore.
Officials with Maryland's Department of Labor, Licensing and Regulation said they have received complaints from consumers about fraudulent practices and have started investigations. But they declined to release the names of individuals or businesses, saying that the investigations are continuing. Civil and criminal penalties can be imposed, officials said.
"There's nothing per se wrong with for-profit businesses" offering loan counseling services, said Sarah Bloom Raskin, commissioner of financial regulation for the Department of Labor, Licensing and Regulation. But such businesses can charge consumers only after they've performed contracted services, she said.
Raskin said some of the complaints under investigation involve consumers paying upfront fees to consultants who do not provide any services and cannot be found. She said housing officials often learn about victims after they have lost their homes.
The consultants "have a right to operate if they operate legally," Raskin said. "They don't have a right to take advantage of desperate Maryland residents who will pay upfront fees with the hope that they will get a mortgage that is sustainable, affordable and allows them to stay in their home."
Homeowners who fear they might have trouble keeping up with mortgage payments should contact their lender immediately and seek free counseling from government and nonprofit sources, Raskin said. And avoid paying high fees for services they can get free.
where to turn
Homeowners worried about foreclosure can go to the Maryland Department of Housing and Community Development Web site for a program called Homeowners Preserving Equity. The site - http://mdhope.org/ - offers resources for finding nonprofit housing counseling.
The U.S. Department of Housing and Urban Development also offers information at www.hud.gov/foreclosure.