HOMEOWNERS FACING FORECLOSURE:

BEWARE OF THE MORTGAGE FOREBEARANCE

SCAM!

At the moment your house is posted for foreclosure, your debt problems are made public with the filing of the foreclosure notice at the County Courthouse. Dozens of law firms, lenders and investors send letters to people whose names and addresses appear on the foreclosure notices. You will receive offers to file bankruptcy for you, lend you money, and even offers to buy your home even if you have no equity.

It’s usually very easy to see what they are offering, but there is one scam that you need to be aware of so that you can protect yourself. The foreclosure notice must be posted at least 21 days in advance of the foreclosure sale date, so that leaves you with little time to get your situation resolved. You don’t have time to waste on a scam.

The scam that you need to watch out for is the offer of a mortgage forbearance to save your home from foreclosure.

What is offered here is help in obtaining an agreement from your mortgage company to cancel the foreclosure sale so that you have time to get caught up on your mortgage. It sounds like a great idea! Who wouldn’t want to avoid a foreclosure and avoid having to file bankruptcy to save their house? It seems like a winning situation on the face of it.

The first thing that you need to be aware of is the limited time that you AND the mortgage company have to arrange a forbearance agreement. It is difficult to arrange, and the mortgage company has lots of other customers trying to do the same thing before they face foreclosure on the same foreclosure sale date as you. At some point, usually just a few days before the foreclosure sale date, the mortgage company says “No Deal,” because they have run out of time to process any more forbearance agreements. It doesn’t matter how many VERBAL assurances that they provided earlier that they would be able to get the deal done. What matters is what is in writing, and without an agreement, you’re stuck. At that point, it’s either file bankruptcy or get ready to move.

The problem you face is that when you wait until a few days before the foreclosure sale date to contact an attorney to file bankruptcy to save your house from foreclosure, you are likely to get the same response that we provide callers right before a foreclosure sale date: We would like to help you, but you waited too late for us to be able to help you. There is not enough time in the next 3-4 days to be able to prepare a bankruptcy case and file it for you.

Foreclosure sale dates are always on the first Tuesday of the month, and I always get several calls for help on the Wednesday, Thursday, Friday and Monday before Foreclosure Tuesday. Unfortunately, we are not able to help them, and sometimes people that I might be able to refer them to are booked up as well.

The people who offer to arrange mortgage forbearance agreements typically fall into two categories. The first is someone who is not an attorney, may reside out-of-state, and charges over a $1,000 before they will do a thing. The calls I get from people on the days just before Foreclosure Tuesday are people that have been burned, and now they have little time and no more cash. It’s a tragedy for them.

The other category of people who offer to arrange mortgage forbearance agreements are bankruptcy attorneys that offer to arrange mortgage forbearance agreements FOR FREE. (That seems odd because in order to successfully arrange a mortgage forbearance agreement, you may have to spend several hours of time working with the mortgage company and the client.) They tell the client that in order to persuade the mortgage company to cancel the foreclosure sale, they must be able to make a payment to the mortgage company to show good faith. They tell the client that the mortgage company would like to see at least $1,200 to $1,500. When it comes time to present the client the news that the mortgage company did not accept the offer, they inform the client that there is still another alternative to save your house, and it only costs $1,000 to get the case started. This has become, for some, a way to charge much more upfront for a Chapter 13 bankruptcy. Is it any wonder that nearly all of the people that hire an attorney for a “free” mortgage forbearance agreement end up filing bankruptcy with that attorney. Some would call that BAIT & SWITCH. You be the judge!

Call us at 210-930-7000 to schedule a free initial consultation to see how bankruptcy would apply to your specific situation.

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