How-to Monday: Foreclosure help ... and "help"
Associated Press photo
You get what you pay for, right? Well ...
If you live by that rule of thumb and you're trying to avoid foreclosure, you'll seek out a for-profit foreclosure consultant who will charge you for any services provided. But consumer-protection advocates say you're much better off going to a nonprofit housing counseling agency that will work with you for free.
Here's why ...
First, the obvious reason: "They're charging a lot of money for something the homeowners don't need to be paying those kinds of sums for," Robert Strupp, director of research and policy with the Community Law Center, says of foreclosure consultants.
It's thousands of dollars in some cases, he says. Any money you don't shell out for foreclosure help is money you could use to pay down late fees and other penalties on your mortgage.
Ruth L. Griffin of the Maryland Housing Counselors Network says the only thing a nonprofit approved by the U.S. Department of Housing and Urban Development might ask a struggling borrower to pay is an incidental cost such as the expense of ordering a credit report.
Besides the difference in dollars, both Strupp and the Maryland Attorney General's Office say you're putting yourself at risk of being scammed if you go anywhere but a HUD-approved nonprofit.
"We have several suits currently pending against people who were purporting to offer foreclosure rescue and in fact took the houses," says Bill Gruhn, chief of the attorney general's consumer protection division. The state earlier sued a foreclosure consultant who "didn't provide meaningful assistance," he adds.
Strupp is also troubled by the consultants who work hand-in-hand with real estate investors looking to buy from homeowners at the brink of foreclosure. "That doesn't seem to put the foreclosure consultant in the right place as an impartial third-party buffer," he says.
In Gruhn's opinion, this is not a shop-around situation. When I asked if a borrower who does some due diligence first should sign on with a for-profit consultant, his answer was succinct: "No."
But what, you ask, about the "certified foreclosure consultants" out there? Surely that should be safe?
"There is no state regulatory certification process," Strupp says. "These people are self-titling."As nonprofit counselors get overloaded with people seeking help, he worries that homeowners will turn to for-profit consultants by default. But attorneys are starting to volunteer their time, and more nonprofit counselors are on the job than before.
"We weren't really doing this last year ... but there was so much volume that we really felt like we needed to help," says Felix Torres Colon, executive director of Neighborhood Housing Services of Baltimore, a nonprofit lender that now does foreclosure-prevention counseling too.
The group sees about 240 people a month, he says.
"Helping people with foreclosure is very difficult; some people have really impossible situations," he says. "So if anyone tells you it's going to be really easy and quick and all you have to do is pay a few bucks, run away."
I know there are Wonk readers in the real estate investment community: Anyone want to defend foreclosure consultants or investors who buy pre-foreclosures? I've heard investors say they're helping people get out of a bad situation by allowing them to sell quickly, but Gruhn says homeowners are better off getting an agent and "selling the home through the market process."