This Family Spent $6,000 to Save Their Home and Still Wound Up Facing Foreclosure

Lageshia Moore of Far Rockaway, N.Y. says her family spent $6,000 in hopes it would save them from foreclosure. “Some people might say, ‘OK, just get a new house.’ But it wasn’t that simple,” says Moore.

When Lageshia Moore and her husband found their home in 2006, they thought it would be a perfect place to raise their family. The $549,000 Far Rockaway, N.Y., duplex even had future income potential if they could find a reliable tenant and rent out one half of the house.

In order to purchase the property and avoid primary mortgage insurance, the couple took out two mortgages to cover the costs.

Like millions of Americans who purchased homes at the peak of the housing bubble, their timing could not have been worse. Moore, a teacher, left her job in 2007. It soon became impossible to meet their $4,000 total monthly mortgage payments. By the summer of 2008, they were deep in default, and the recession sent their home value plummeting.

They were officially underwater on their house, and the family was living solely on Moore’s husband’s income as a driver. Eventually, they were notified that their lenders had begun the foreclosure process.

“Some people might say, ‘OK, just get a new house.’ But it wasn’t that simple,” Moore said. “This was the house where we were raising our family. My husband is very proud and homeownership means a lot to him — so we weren’t going to just let it go.”

Instead, Moore and her husband did what many families facing foreclosure do: They began looking desperately for “foreclosure relief” companies, law firms, and groups who promised help. A nonprofit connected them to a court-appointed attorney, but it didn’t stop the foreclosure process. So they turned to companies that advertised foreclosure relief on radio stations and online.

Over the course of six years, the family handed over thousands to a handful of relief groups they thought could stop the foreclosure. “We were desperate, and we thought, ‘OK, we’ll hand over this money to someone and they’ll just fix it,’” Moore said.

One of those foreclosure relief companies was Florida-based Homeowners Helpline, LLC. In 2015 the family gave the company a total of $6,000: an initial $2,000 down payment, and then $1,000 in four monthly installments. By that time Moore had found a new job, but the family hadn’t paid the full mortgage amount in years.

Moore shared the contract with MagnifyMoney, in which Homeowners Helpline says it will “perform a mortgage loan review and audit,” including actions like sending a cease-and-desist letter and a “Qualified Written Request” for information about the account to the family’s lenders.

Here’s what Moore says happened: Homeowners Helpline connected her family with a New York City lawyer who “kept asking for endless paperwork, month after month after month,” and who eventually stopped answering their calls, she claims. They finally got in touch with him just before the house was set to go up for auction, she said, and he told them the efforts to stop the auction had failed.

“We were horrified,” Moore said.

Homeowners Helpline told MagnifyMoney a different story. Sharon Valentine, a processor at Homeowners Helpline who worked on Moore’s husband’s case, said the family was slow to hand over needed paperwork and “unrealistic about their expectations.”

Crucially, Valentine said, the family didn’t tell Homeowners Helpline the house was actively in foreclosure until they mentioned the auction. “And then it was like, ‘Wait, what?’” Valentine said. The company would have taken different actions had they known about the foreclosure proceedings, she added.

“We can’t help you effectively if you don’t give us all of the information and the paperwork,” Valentine said. “In general, some clients come in and they hear their friend was able to get a 2% [mortgage] rate or cut their payments in half, and it’s like, ‘Well, that’s a very different situation.’ We try to help educate, but sometimes you can’t change that expectation.”

The Best Help is Free

But there is a free resource to educate panicked homeowners about expectations and provide foreclosure assistance — as well as help them avoid scam companies that will steal their money. NeighborWorks America runs LoanScamAlert.org, which aims to be a one-stop shop for people with questions about or problems with their mortgages.

The Loan Modification Scam Alert Campaign launched in 2009, when Congress asked NeighborWorks America to educate and help homeowners. LoanScamAlert.org offers resources including information about how to spot and report scams, and lists of trusted authorities who can help. Its main goal: Drive people to call the Homeowner’s HOPE Hotline, at 888-995-HOPE (4673), which is staffed 24 hours a day by counselors who work at agencies approved by the U.S. Department of Housing and Urban Development (HUD).

“We provide them with a single, trusted resource,” said Barbara Floyd Jones, senior manager of national homeownership programs at NeighborWorks America. “It gets confusing when you see companies with all of these similar names advertising on the radio or TV, and then you have to research them. We want to let people know they don’t have to pay a penny for assistance.”

Anyone — regardless of income or other factors — can contact the counselor network to receive free advice and help. Homeowners aren’t always aware of the myriad government-affiliated groups that can provide assistance, or of the federal and state programs created to speed loan refinances and modifications, Floyd Jones said.

“We can never promise that everyone will be able to save their home; there are a variety of circumstances,” Floyd Jones said. “But we can promise a trusted counselor will listen, take a look at your paperwork if you want, and tell you all of your options.”

In fact, if a homeowner grants permission, the counselor can contact the mortgage lender directly to discuss options to stop the foreclosure, modify the terms of the loan, or otherwise make a deal. If need be, homeowners will also be connected with vetted legal assistance — although Floyd Jones noted not every situation requires a lawyer.

True to LoanScamAlert.org’s name, the hotline counselors also take complaints about mortgage-related scams: third-party companies that take the money and run, or slip in paperwork that unwittingly gets homeowners to sign over the deed to the house.

The Federal Trade Commission received nearly 7,700 complaints about “Mortgage Foreclosure Relief and Debt Management” services in 2016 — down from almost 13,000 in 2014, but still a significant figure.

“Stopping phony mortgage relief operations continues to be a priority” for the FTC, said spokesman Frank Dorman.

Both the FTC and LoanScamAlert.org offer tips to avoid scams — and to make sure you’re taking advantage of all federal and state programs that could help.

Red Flags:

  • They ask you to pay before any services are rendered.
  • Pressure to pay a fee before action is taken, sign confusing paperwork, or hire a lawyer off the bat. As with any scam, fraudulent mortgage relief services rely on high pressure to push vulnerable homeowners into taking action. Companies shouldn’t ask for “processing fees” or “service fees” early in the process, Floyd Jones said, as early foreclosure-stoppage efforts don’t cost anything. Be wary of signing any document, as you could unwittingly surrender the home’s title or deed to a scammer.
  • They make promises they can’t keep.

    Promises or guarantees they’ll save your home from foreclosure — or even claims like “97% success rate!” No one can guarantee results.

  • They say they’re affiliated with the U.S. government.

    Companies that claim to have an affiliation with a government agency. Some scammers may claim to be associated with the government, charging fees to get you “qualified” for government mortgage modification programs like Hardest Hit Fund. You don’t have to pay for these government programs — and lenders, particularly big banks like Wells Fargo and Bank of America, may be able to offer you their own modification options directly.

  • They want you to send your mortgage payments to them.

    Companies that tell you to start paying your mortgage directly to them, rather than your lender. They may promise to pass the money along, but they could pocket it and disappear.

    Companies that ask you to pay them through unconventional methods: Western Union/wire transfers, prepaid Visa cards, etc., instead of a check. They’re trying to get your money in a way that’s hard to trace.

As for Lageshia Moore and her husband, the family ultimately filed for bankruptcy — a move that can stop the foreclosure process, but only temporarily — and are now working with a law firm on a loan modification she hopes will reduce their payments to a manageable monthly sum. In giving advice to others, she reiterates the simplest but most important tip: “Just do your research.”

“You’re panicked, but you have to do your due diligence,” she added. “Really sit down and weigh the pros and cons: foreclosure, short sale, etc. What does this process or contract really mean? It’s an emotional time, but you have to try to keep the emotion out of it. That’s what I would tell myself.”

What to Do if You’re Facing Foreclosure:

  • Call a HUD-certified counselor at 1-888-995-HOPE. You’ll get advice and help for free, and while counselors can’t ever promise to save a home, they’ll be happy to take a look at any paperwork or information about your case, contact your lender about options if you grant permission, and connect you with vetted legal assistance if need be.
  • If you’re not facing foreclosure yet, but you’re worried that you’re about to run into trouble, contact your mortgage lender’s loss litigation department. They may be willing to work with you. Your lender can also tell you whether you’ll qualify for government programs.
  • Overall, don’t let desperation stop you from taking the time to research any potential actions, including signing on with a relief company. Explore the company’s background and track record. Check online for reviews from other homeowners — and be sure to look up phone numbers too. Many scam companies simply shut down, reopen under a new name, and retain the same phone number.

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10 States Where Foreclosure Woes Linger

Foreclosure rates across the country continue to improve, but these 10 states are still struggling with above-average residential foreclosures.

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2017 Started With Fewer Homes in Foreclosure

Good news: The U.S. residential foreclosure rate fell 12.94% in January from the same time in 2016.

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10 States That Struggled Most With Foreclosures in 2016

Overall foreclosure activity and the number of new foreclosures fell in 2016, but several states bucked the national trend.

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U.S. Foreclosure Activity Went Way Up in October

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The Foreclosure Crisis Is Over, But Not in Every State

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10 States Plagued By Foreclosure

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10 States With the Biggest Foreclosure Problems This Year

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How Many Americans Have Gone Through Foreclosure?

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During the Great Recession, many Americans lost their homes due to foreclosure. In fact, according to real estate data company RealtyTrac, there were 6,324,545 completed foreclosures from January 2006 to April 2016.

“It is a big number,” Daren Blomquist, Senior Vice President of RealtyTrac said in an email. “Normal would be around 250,000 bank repossessions per year. These last 10 years represented the biggest loss of home ownership and shifting of real estate wealth since the Great Depression.”

The Current Status of the Housing Market

The market has improved, but that doesn’t make it immune to foreclosures. (You can see the 10 states with the biggest foreclosure problems here.)

“The foreclosure crisis is largely behind us, although still certainly lingering in certain pockets,” Blomquist said. “Unfortunately, we are already seeing signs of another housing bubble in certain markets, so people should continue to be cautiously optimistic when it comes to the housing market.”

But Blomquist says people who can truly afford to buy a home may still benefit from it.

“Homeownership done responsibly is still one of the best ways to build wealth,” Blomquist said.

What a Foreclosure Can Mean for You

“Foreclosure will obviously create a crater in a credit report for some time,” Troy Doucet, attorney with Doucet & Associates in Columbus, Ohio, said in an email. “However, foreclosure is not the end of the world. Those with foreclosure in their credit past will find their credit scores slowly improve as time passes. After a few years, they may even be able to buy another house.”

If you default on a loan or go through a foreclosure, it will appear on your credit report for seven years. But you can work to improve your credit score. (Consider these steps to fix your credit.) To see how your mortgage payments are affecting your credit you can take a look at your free credit report summary, updated monthly, on Credit.com.

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Is My Foreclosure Still Hurting My Credit?

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You’ve worked hard to put your foreclosure behind you. Your monetary issues leading to the loss are in the past and you’re ready to move on, both figuratively and literally. There’s just one small thing potentially holding back: your credit score.

But exactly how long do you have to worry about a foreclosure harming your credit?

Foreclosure Facts 

A foreclosure will appear on your credit report as of your foreclosure filing date — not at the date of sale or tail-end of the foreclosure process. At this point, you can expect your credit score to take a big hit — up to 300 points, depending on the other negative information (like a first missed mortgage payment) that may already be on your report.

The foreclosure will generally remain on your credit report for the next seven years. But, while it will affect your score for that time, you won’t necessarily be saddled with a bad score for the duration.

A FICO study, for instance, found that a consumer with a 680 FICO Score (before the foreclosure event) could reach that same score level in roughly three years. And that type of credit score, while not worthy of the best terms and conditions, could net you financing, like an auto loan or, at the very least, a secured credit card.

Will I Have a Hard Time Getting a Mortgage?

Unfortunately, even as score rebounds, the presence of a prior foreclosure could make it tricky to score a new home loan. Just seeing that line item could make many mortgage lenders wary of approving your application, Scott Sheldon, a senior loan officer based in Santa Rosa, California and Credit.com contributor, said.

“The longer in the past, the less of an issue [the foreclosure is],” Sheldon said in an email. “Waiting time is the most important thing they look at.” He estimates an applicant with a foreclosure on file would need to wait around three years to obtain government financing, like a Federal Housing Administration home loan, and could need to wait the full seven years for a standard 30-year conventional loan.”

Rebounding From Foreclosure

Still, all hope is not lost.

To up your odds of getting any type of new financing, you should focus on establishing and maintaining good habits. You can generally improve your credit scores over the long-term by making all payments on time, keeping debts low and limiting inquiries for new credit until your score rebounds. You can track your progress by viewing your free credit report summary, updated each month, on Credit.com.

And it’s important to make sure the foreclosure is removed from your credit report once that 7-year waiting period elapses. You can check your credit reports for free each year at AnnualCreditReport.com. If a foreclosure appears longer than it should, be sure to dispute any inaccuracies with the credit bureau in question.

[Offer: If you need help fixing errors on your credit report, Lexington Law could help you meet your goals. Learn more about them here or call them at (844) 346-3296 for a free consultation.]

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