Foreclosure and Credit Assistance
The Attorney General provides Consumer Alerts to inform the public of unfair, misleading, or deceptive business practices, and to provide information and guidance on other issues of concern. Consumer alerts are not legal advice, legal authority, or a binding legal opinion from the Department of Attorney General.
FORECLOSURE AND CREDIT ASSISTANCE
As a result of the recent home mortgage foreclosure crisis, there has been a dramatic rise in the number of unscrupulous businesses that promise to help consumers keep their homes. The Federal Trade Commission has warned of scam artists who prey on the vulnerability of desperate homeowners in order to collect handsome fees -- but don't deliver any of the promised services. Many of these shady operations engage in high-pressure sales tactics and demand substantial fees in advance. (Links to consumer alerts and advisories are set forth below.)
If you are behind on your mortgage payments and facing foreclosure, WATCH OUT for fraudulent foreclosure consultants who target distressed homeowners. The following tips can help you avoid being scammed.
RED FLAGS -- Avoid Working with any person or company that:
Guarantees to stop the foreclosure process - no matter what the circumstances. Instructs you not to contact your lender, lawyer, or credit or housing counselor.
Collects a fee before completing all services. This practice may be illegal in many circumstances in Michigan under the Credit Services Protection Act. (See Below for an explanation of that Act)
Encourages you to lease or rent your home so you can buy it back over time.
Tells you to make your mortgage payments directly to it, rather than to your lender.
Tells you to transfer your property deed or title to it.
Offers to fill out paperwork for you.
Pressures you to sign paperwork that you haven't had a chance to read thoroughly or that you don't understand.
WHAT YOU CAN DO TO AVOID BEING A VICTIM:
DON'T sign any documents without reading and understanding them first. Many homeowners think that they are signing documents for a new loan when, in fact, they are transferring title to a new owner.
DON'T transfer title or sell your home to the foreclosure rescuer.
DON'T pay money to a foreclosure rescuer before any work has been done. This practice may be illegal in many circumstances in Michigan under the Credit Services Protection Act. (See Below for an explanation of that Act).
DON'T ignore letters from your lender/loan servicer. Contact your lender/loan servicer as many are willing to work with homeowners who are behind on their payments.
DON'T pay your mortgage payments to someone other than your lender, even if he/she promises to pass the payment on to the lender.
DO contact HUD at 1-800-569-4287 or the Michigan State Housing Development Authority at 1-866-946-7432 for a referral to a housing counselor near you.
MICHIGAN CREDIT PROTECTION ACT
The Michigan Credit Services Protection Act protects consumers by requiring most businesses that offer to prevent foreclosures or modify mortgage loans to complete the services before collecting a service charge from the consumer. In other words, a credit services organization may not charge a fee in advance.
IT IS ILLEGAL TO DEMAND PAYMENT BEFORE COMPLETING SERVICES
Under Michigan's Credit Services Protection Act, it is illegal for most companies and individuals to charge or receive a fee before completing any of the following services:
Offering advice or assistance for avoiding foreclosures on a home mortgage;
Negotiating with creditors on the consumer's behalf to defer or lower payments;
Taking steps to improve, or offering advice or assistance for improving, a consumer's credit records, history, or rating;
Obtaining credit or a loan, or offering advice or assistance in obtaining credit or a loan, on behalf of a consumer.
WHAT QUALIFIES AS A CREDIT SERVICES ORGANIZATION?
Any individual or business entity that provides or offers foreclosure prevention services (or any of the other credit-related services listed above) any is a "credit services organization" covered by the Act, unless one of the following exceptions applies:
Lenders and debt collectors licensed by the State of Michigan;
Federal banks and credit unions;
Judges and persons acting under court order;
Consumer reporting agencies engaged in the regular course of the credit reporting business;
Licensed debt management businesses;
Registered investment advisers and broker-dealers;
501(c)(3) tax-exempt, charitable organizations.
WHAT OTHER PROTECTIONS DOES THE CREDIT SERVICES PROTECTION ACT OFFER?
The Act requires credit services organizations to:
Execute a written contract with the consumer that identifies all services provided;
Complete the promised services within 90 days after the contract is signed;
Be truthful in dealings with consumers and creditors.
The Act also allows consumers to bring private lawsuits and, if successful, to recover:
Their actual damages (but not less than the fee they paid);
Their legal expenses, including attorney fees and court costs; and
The full text of the Michigan Credit Services Protection Act is available from the Michigan Legislature's website at:
additional INFORMATION ON FORECLOSURE RESCUE SCAMS, CREDIT COUNSELING, AND FORECLOSURE PREVENTION
Michigan Attorney General's Office:
"Avoid Foreclosure - Tools to Help Save Your Home"
(information and schedule of upcoming public forums)
"Do You Qualify for the President's Plan?"
"Michigan Lending and Foreclosure Guide"
"Avoiding Foreclosure: A Guide for Michigan Homeowners"
"Beware of Foreclosure Rescue Scams-Common Warning Signs"
"Get Help If You Are Behind on Your Mortgage Payments"
"Understanding the Foreclosure Process"
"Home Lending and Foreclosure Rescue Scams"
"Avoiding Credit Repair Scams"
No one can legally remove accurate and timely negative information on a credit report. This alert provides some tell-tale signs that a credit repair offer is a scam, details your rights when contracting for credit repair, and gives resources for free self-help credit repair.
Federal Trade Commission:
"Foreclosure Rescue Scams: Another Potential Stress for Homeowners in Distress" http://www.ftc.gov/bcp/edu/pubs/consumer/credit/cre42.shtm
"Fiscal Fitness: Choosing a Credit Counselor"
U.S. Financial Literacy and Education Commission:
General Information on Financial Matters
Home Ownership Resources (including Foreclosure Prevention):
US Dept of Justice:
Credit Counseling Agencies Approved by US Bankruptcy Courts in Michigan:
Internal Revenue Service:
The IRS has revoked tax exemptions for many non-profit credit counseling organizations. Check the IRS database of tax-exempt, charitable organizations to determine if a non-profit agency has retained its tax-exempt status:
HOW TO FILE A COMPLAINT WITH THE ATTORNEY GENERAL
Consumers may report violations of the Credit Services Protection Act to the Attorney General's Consumer Protection Division at:
Consumer Protection Division
P.O. Box 30213
Lansing, MI 48909
Toll free: 877-765-8388
www.michigan.gov/ag (online complaint form)