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Failure to communicate

As if people facing foreclosure of the mortgages on their homes did not already have enough problems, a new wave of scam artists is targeting them.  According to the FTC, so-called forensic loan auditors are offering to review mortgage loan documents to determine whether the lenders complied with state and federal mortgage lending laws.  The other day, a client came to me with an ad from one such company.  The “auditors” say the borrower can use an audit report to avoid foreclosure, accelerate the loan modification process, reduce loan principal, or even cancel a loan.  Of course, they expect the borrower to pay large up front fees in advance.  This is illegal in many states.  Even if it is not illegal, it is foolish.  The FTC recommends that borrowers talk directly to their lenders to negotiate a new repayment schedule. 

Why would someone already deeply in debt, unable to pay their mortgage, fork over hundreds or thousands of dollars to someone to do what they could do themselves?  Two reasons.  First, many lenders or mortgage servicers are so swamped with delinquent mortgages that they do not have sufficient personnel to talk to every borrower who needs help.  Borrowers cannot get in touch with anyone who has authority to work out a new payment plan, so they think that someone with a fancy sounding title, like forensic mortgage loan auditor, might have better luck.  Second, borrowers may lack confidence in their own negotiation skills.  In either case, the person to see for help is a lawyer.  Most lawyers will charge less than the scam artists and will not waste time searching for unnecessary negotiating leverage.  Borrowers already have all the leverage they need.  Banks do not really want to own all of the homes securing their mortgage loans.  If the borrower’s lawyer cannot get a response from the lender, he will certainly be able to get a response from the lender’s attorney when a foreclosure action is filed. 

As they said in the movie Cool Hand Luke, “what we’ve got here is failure to communicate.”  The solution to a lack of communication, or inability to communicate, is to start talking.  If mediation is available or required, the borrower should definitely take advantage of it, using the mediator to help negotiate with the lender.  Ignoring the problem or hoping someone will find a silver bullet to make it go away is rarely the answer.  In the current economy, mortgage default and foreclosure are legal problems that no one should be embarrased to talk about. 

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