Homeowners fall victim to scams trying to avoid foreclosure
Sunday, Oct. 2 by By Amanda Iacone, Virginia Statehouse News
http://www.loudountimes.com/index.php/news/article/homeowners_fall_victim_to_scams_trying_to_avoid_foreclosure123/

RICHMOND — Randy Edwards and his wife Sandra weren’t behind on their mortgage payments when they met with representatives from Nationwide Loan Modification Bureau LLC last year.

But Sandra, 54, was planning to take time off from work for foot surgery, and with her husband on disability, the couple wanted to refinance their mortgage to ensure they could continue making the monthly payments on their Virginia Beach home.

They heard about Nationwide from someone they knew — whom they declined to identify — and company staff members Rhonda Wyland and principle manager Jason Gillentine guaranteed the Edwardses that their mortgage would be modified.

The couple paid $2,400 in advance for Nationwide’s services, but seven or eight months passed without any news on their application, the couple said.

That’s when they saw a local television news report about Nationwide and Gillentine, who was accused of taking money from homeowners, like the Edwardses, and doing nothing to help them modify their loans.

“I don’t understand why somebody like that can’t be arrested. It ain’t no telling how many people he cheated out of that money,” Sandra Edwards said of Gillentine, with whom they worked to file their application. “I could have done a whole lot of things with that $2,400.”

Sandra and Randy Edwards, 58, are among the hundreds of victims of mortgage modification scams that sent the state Attorney General’s Office to court seeking restitution.

So far the state has targeted four southeastern Virginia businesses for illegally charging advance fees for mortgage application and refinancing assistance. But similar businesses have opened their doors throughout the state including in the Winchester area, where the foreclosure rate is the highest in the state.

“Whenever there is a crisis, there is an opportunity for unscrupulous individuals to take advantage of folks who are going through difficult times. We are making it a priority to stop foreclosure rescue scammers from preying on vulnerable people,” Attorney General Ken Cuccinelli said of his office’s effort to go after these businesses.

Enforcement

Although the foreclosure rate in Virginia has remained low compared with other states, the percentage of houses in foreclosure has remained steady at 2 percent since March 2009, according to the Virginia Housing Development Authority.

But one-third of mortgages in the state are underwater, meaning homeowners owe more than their house is worth, which can diminish their ability to renegotiate their loan, according to CoreLogic, a California-based real estate data and research company.

As of July, the Winchester area has seen the highest foreclosure rate in the state at 0.45 percent, followed by 0.4 percent in southeastern Virginia, according to state housing data.

Businesses have popped up statewide to provide homeowners with mortgage assistance. Some offer legitimate services, while others charge exorbitant fees and make little or no effort to negotiate with their clients’ banks, according to housing counselors who work with foreclosure clients.

To combat these scams, the Attorney General’s Office negotiated settlements with three businesses, known as mortgage loan modification companies, and filed a lawsuit in July against a fourth company for illegal business practices.

The lawsuits are based on violations of the state’s Foreclosure Rescue Law and the Virginia Consumer Protection Act. The former bars companies from charging advance fees for services related to avoiding foreclosure, while the latter prohibits companies from using deception, fraud, false promise or misrepresentation when conducting business.

According to the Attorney General’s Office, the outcomes of the lawsuits are:

* Virginia Beach-based Nationwide agreed to pay $28,000 in restitution to less than 20 victims plus another $32,500 in civil penalties and court cost reimbursement. The victims are expected to receive their restitution in November or December.

* Real Estate Resolutions LLC, based in Virginia Beach, agreed to pay almost $7,000 in restitution, civil fines and court fees. The restitution will compensate five victims for advance fees they paid.

* American Neighborhood Housing Foundation, based in Chesapeake, agreed to repay more than 270 customers their advance fees, totaling $94,388.

In July, the attorney general sued R.L. Brad Street LLC, also based in Chesapeake, for charging at least five customers $3,000 each before providing foreclosure rescue services. That case remains open, according to the attorney general’s office.

Rhonda Wyland, the company manager and the same woman who worked with the Edwardses, said R.L. Brad Street has been dissolved, and she declined to comment further when contacted by Virginia Statehouse News.

Messages left with the other businesses or their attorneys were not returned.

Risky business

Most of these companies are a scam, said Jay Speer, executive director of the Virginia Poverty Law Center, which advocates for low-income Virginians and studies issues related to poverty, like housing.

“They take a lot of money from people. Some of them do nothing. Some of them just delay things a little bit for you,” Speer said.

Loan modification scams are a widespread problem in Virginia and across the country. Mortgage lenders have exacerbated the problem by mishandling homeowner’s pleas for help, he said.

In the northern Shenandoah Valley, Lorie Noakes has worked with homeowners who have paid $500 to $1,800 to have a company renegotiate their loans unsuccessfully. Then they turn to her, said Noakes, executive director of Blue Ridge Housing Network, a nonprofit first-time homebuyer program.

The agency began offering free foreclosure counseling several years ago when ballooning mortgage payments and rising interest rates were common. Today Noakes’ clients struggle to pay their monthly mortgage bill because they are unemployed or have lower-paying jobs, she said.

Negotiating with a bank for a lower interest rate or extended repayment period can take two to three months without any guarantees, she said.

Mortgage lenders don’t make it easy. They lose paperwork. Someone different answers each time a homeowner calls. Lenders renegotiate the terms for clients who may not be a good candidate, but reject changes for qualified homeowners, Noakes said.

“Beware. Don’t pay anyone to help you,” she said.

Lenders don’t want to foreclose, but for homeowners who are months behind on their payments and have ignored past due notices and phone calls, that is the only option, said Bruce Whitehurst, executive director of the Virginia Bankers Association, which lobbies on behalf of the banking industry.

“The most important thing that any borrower who is behind on his or her mortgage can do is call whoever is servicing your mortgage,” Whitehurst said.

The mortgage company will detail the options available, including loan modification, he said.

Many loans are modified, allowing the people to stay in their house and avoid foreclosure, which is the bank’s goal, Whitehurst said.

According to the bankers association, more than 25,000 loans were modified between April 2010 and May 2011 and another 31,000 repayment plans were initiated in Virginia.

Despite the warnings, homeowners, like the Edwardses, are lured into loan modification scams.

The couple never did receive a loan modification and although they are making their mortgage payments, it’s been rough now that both are on disability, said Randy Edwards.

The Edwardses, who expect to receive just $600 in restitution, said they should have tried to work with their lender first.

“We learned a valuable lesson. If it’s too good to be true, it is,” said Randy Edwards.