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How to Protect Your Home and Family; Foreclosure Numbers Continue to Climb; Advice on How to Spot a Mortgage Fraud Scam; The Fight Against Deed Fraud

Aired April 18, 2009 - 09:30   ET


GERRI WILLIS, CNN HOST: Hello, I'm Gerri Willis and this is YOUR BOTTOM LINE, the show that saves you money.

Your home is supposed to be a sanctuary, but what if it's under threat? From foreclosures to mortgage scams, how to protect your home and your family. This is YOUR BOTTOM LINE.

Foreclosure numbers continue to climb, but behind those monthly statistics, earnings of real people and the lives they build in the homes they are fighting to hang on to. This is where we start our show today, with people like the Montaldis a hard working family doing all they can to get ahead and yet finding themselves falling behind.


BARACK OBAMA, PRESIDENT OF THE UNITED STATES: We're starting to see some scam artists out there who are contacting people saying you can refinance your home, the government's got a program, we're ready to help.

WILLIS (voice-over): Help is what Joe and Janice Montaldi desperately need and thought had finally arrived.

JANICE MONTALDI, FACING FORECLOSURE: We've been receiving these enticing offers, "stimulus package," all these wonderful rescue letters, and then here in January when we got this latest letter and I was like, well, Joseph, we've got to do something because we can't wait until the sheriff knocks on the door and says vacate the premises.

WILLIS: How did the Montaldis get to the point they could lose the home they've lived in the last 30 years? It's a common story across the country, a steady job, a good home and a modest lifestyle. Then the housing market collapsed. The recession hit and foreclosure followed.

JANICE MONTALDI: My husband, Joseph, was working for a very good construction company and had a substantial job that we were able to afford life and our mortgage and everything and the building business kind of fell apart in Florida, so he lost that job.

There you go.

WILLIS: Joe and Janice say they weren't big spenders, rarely went out to dinner, didn't take vacations and carried no credit card debt, but in just one year their combined income was cut in half and they knew they were in trouble.

JANICE MONTALDI: We cashed in his 401(k). We cleaned out our savings account. We did whatever we had to do in order to meet our obligations for our mortgages and things.

WILLIS: After their savings had been wiped out and with construction work still hard to come by, rather than lose their home, they contacted the loan servicer, a smart move according to mortgage fraud specialist Ann Fulmer.

ANN FULMER, VP, BUSINESS RELATIONS INTERTHINX: The best way to protect yourself is to be proactive. If you're in a situation where you know that you're likely to have problems paying your mortgage or you're right on the brink of that, don't wait for the bank to contact you, go ahead and talk to the bank immediately.

WILLIS: That's what Joe and Janice did in July 2008.

JANICE MONTALDI: Everyone was talking about the buzz word was modifying your loan. So, I went online with our mortgage company and applied for this modification of loan and went through this process, and they said they were inundated with tons of these, that it was going to take quite a while to get any kind of response from them.

WILLIS: They say they kept checking in with Wilshire Credit Corporation, the company in charge of their loan modification, but it was December before they got an answer and a plan. The wait cost them. They were now behind on their mortgage and incurring late fees.

JANICE MONTALDI: And in January we were supposed to receive new loan papers in the mail. She said sign them ASAP, get them back and you'll have a new payment due date, new payment amount. I said, wonderful. Well, January came and I didn't get those papers in the mail.

WILLIS: So they called back.

JANICE MONTALDI: Yes, I need to speak to a service representative.

JOE MONTALDI, FACING FORECLOSURE: We never talked to the same person twice. Never.

JANICE MONTALDI: Each time you call they put you through, well, we need to update your financial status. You know, I'm like, nothing has changed.

WILLIS: The Montaldis were talking to different people and getting different answers. They say once they were told they made too much to qualify for a loan modification and once they made too little.

JANICE MONTALDI: You're $16.85 out of budget and I nearly died. I said I will do whatever it takes for $16.85. Do you want me to eat cat food? I will. But for $16.85 I will make this work for you.

WILLIS: Wilshire declined to comment on the case citing privacy laws, but told CNN "We are committed to helping people modify their loans to address their current financial situation and remain in their homes."

For the Montaldis time was running out and they didn't even know it.

JANICE MONTALDI: I was still sending in $1,000 each time I could come up with it and then just here recently since, I think it was January or February, they stopped taking my money. I think we had gone from the modification status into a foreclosure status, probably. We didn't really get any clear information on that.

WILLIS: Including whether or not the Montaldis' home had been put in foreclosure. We checked. It was on March 31st, 2009. And that's when the offers of help, the kind President Obama has warned about, began to arrive daily in the mail.


WILLIS: Unbelievable. We'll find out what happened next to the Montaldis in a bit. But first, let's talk about how they got to this point. Did they do the right thing and what should you do if you find yourself in the similar situation. Lynnette Khalfani-Cox is a personal finance expert.

Lynnette, you know, I know I've said this a million times. You've said it a million times.

LYNNETTE KHALFANI-COX, PERSONAL FINANCE EXPERT: Call your lender. Contact the lender, right? Is that what you were going to say? I think they did do the right thing in trying to reach out to the loan servicer and say, listen, we have a situation, we need help.

Probably where they might have erred a little bit is in not getting a third party involved earlier in the process. A lot of these banks, a lot of these loan servicers are swamped and, frankly, for people who aren't very delinquent, they're putting them last on the list.

What I would have suggested that they do earlier is to go to a HUD-approved credit counseling agency or HUD-approved housing agency that could help them. Nonprofits are out there and they don't cost a lot of money. Most of them are free, in fact, to get you some assistance and to intervene on your behalf with the lender.

WILLIS: Lynnette, thank you for that. Desperate and afraid of losing their home, the Montaldis thought they had a solution. That's when the story took an unexpected turn.


WILLIS: Families across the country are fighting to hang on to their homes, foreclosures up 17 percent in March compared to the previous month and up 46 percent from a year ago.

We're talking about families like the Montaldis struggling to keep up this their mortgage payments. They tried to modify their loan but ultimately went into foreclosure. Desperate and afraid of losing their home they answered a flyer in the mail from a company promising help but that's when the story took an unexpected turn.


JANICE MONTALDI: It says right here on the back side we will obtain new loan modification terms acceptable to you.

WILLIS: Solicitations to help struggling homeowners are often anything but. In fact, they're likely effective and targeted marketing materials for companies running mortgage rescue scams.

The Florida attorney general told CNN they've looked into 200 businesses with 50 ongoing investigations and a dozen lawsuits filed against companies involved in mortgage rescue fraud.

BILL MCCOLLUM, FLORIDA ATTY GENERAL: One company's case recently we had this line you need to pay $2,700 or so up front so you could get a forensic analysis of your mortgage and then $990 more if that was something that showed up they could help you with for loan modification services.

WILLIS: In Florida and several other states charging an upfront fee without having first performed mortgage services is illegal. That's what Janice was asked to do when she replied to one of the many post cards, this one from E Mortgage Recovery.

JANICE MONTALDI: Their marketing skills are very good because they highlighted all the pertinent information I was looking for. It seemed like their logo looked like a very official government-type agency.

WILLIS: So she called.

OPERATOR: Welcome to E Mortgage Recovery. Congratulations on your preapproval.

JANICE MONTALDI: There was a very nice gentleman, there again, very good marketing. He was very kind and said that there were lots of people in this situation. They were very active in helping lots of people. They got very good results. So I kind of thought, well maybe -- maybe this was the answer. And so I bought into it.

WILLIS: Literally. Janice's checking account was charged $1,000 the very next day, even though no services had yet been rendered. Again, that's illegal under a recently passed Florida law. After CNN alerted the Florida attorney general's office about Janice's case, they called her for more information.

JANICE MONTALDI: It said that you only had to pay 50 percent down now and that they would finance the other 50 percent along the way. And that was the advantage to responding to this post card right away.

WILLIS: Janice says when she called E-Mortgage Recovery to request a refund, the representative told her she was making a mistake and putting her home at risk and even implied the Florida attorney general's office didn't know what they were talking about.

Ultimately after speaking to a manager, Janice did get her money back. E-Mortgage Recovery claims they have a 95 percent success rate, but declined to be interviewed on camera, instead sending to CNN a statement which includes this about upfront fees.

"The complexity and dynamic nature of the constraints put on a for profit, non-attorney firm such as ours is challenging. However, we pledge and commit to executing best practice in every state we engage business in."

The Montaldis are working with a group to modify their loan and are hoping to find a way to stay in their home.

JANICE MONTALDI: If it was something of your own doing you could say, well, you deserved it. You overspent, you know, you did something stupid, but when you're just going along and just barely getting by and just doing what you're supposed to do to be a responsible person and that doesn't matter anymore, then you're left with wondering, well, how are you supposed to come out in the end with all of this? So, that's kind of where we are wondering how we'll come out in the end.


WILLIS: Wow. What a story. Well, joining us now with some advice on how to spot a scam, Ann Fulmer, she's vice president of Intrathinx, that's a company specializing in mortgage fraud from Atlanta. Oliver Frascona is a real estate attorney in Denver and with us again, Lynnette Khalfani-Cox, she's author of "Your First Home."

Oliver, I want to start with you. This is just so upsetting to see people like this fighting for their home and so many folks when they're in this situation, and there are a lot of people who are, they think they have no rights whatsoever. But that's not true. What kinds of rights do people like the Montaldis have?

OLIVER FRASCONA, REAL ESTATE ATTY: Well, I think they have the right to have adequate help to get their loan modified. The mistake they're making is that -- to give you an analogy, they're going out looking for food and instead the wolf is looking for them. They need to realize it's their job to go find the right source. If the source is finding them, they got a problem. Going to HUD is the place to go, going to a good real estate brokerage company, going to a reputable mortgage company, going to the attorney general, going to the division of real estate in their state.

The people who are having an issue are somewhat embarrassed sometimes, but they need to reach out for the solution, not wait for the solution to come to them because they will take advantage of them, because they will take advantage of them. These people are bad people.

WILLIS: Yeah, I agee. You know, red flags, here. Let's -- Ann, I want to talk about what was really interesting about this case was being asked to pay for services before you get them. In the state of Florida that's illegal. Not true everywhere.

FULMER: I think Oliver is correct if someone is approaching you with an offer of help it's more likely to be a wolf than it is a savior. A lot of times because they're looking for desperation and they're piggybacking on the federal programs that are out there, a lot of times you'll see the name "HUD" in one of these offers. HUD will not come to your door and offer to help, you need to go to HUD.

Or you'll say "federal loan modification" or anything with the word "federal" and sometimes the seals and the graphics that are used make it look like it really did come from the federal government, but I think the key really is if it's someone who is approaching you with an offer of help, be very careful because they're most likely trying to help themselves.

WILLIS: Oliver, did you want to jump in on that?

FRASCONA: I think she's absolutely correct. Absolutely correct. The secret is to go find the help and the help is out there. There are a lot of programs and a lot of help for people like these, but they're not the help that's coming from the scam artists and the solicitors who are sending this stuff by mail and e-mail. It's a good analogy is all those e-mails you get from the people from Africa. This is the same stuff.

WILLIS: Well, Lynnette, I want to get to something really important here, because people think that the only thing to do is just to go right into foreclosure. But there are actually other ways you can solve this problem. What are the kinds of things you can drive for besides maybe the loan modification?

KHALFANI-COX: Right, you can get a forbearance where you might get the ability to put off making payments for a set amount of time. You might be able to get a reinstatement or repayment plan worked out, maybe your lender will allow you to take what's in arrears, say several thousand dollars, and tack that on the back end of your loan and you pay that off once the house is either sold or refinanced.

So, don't think that it has to be either a loan modification. If that works, then great, you know, some people might even get their interest rates lowered, they might be able to get their payment term stretched out. But there are other alternatives. So, it's not just pure loan modifications.

WILLIS: All right. Lynnette, Oliver, Ann, I want you just to hang out, because, we're going to talk to you again in just a few minutes. Your home is your most valuable asset, protecting it is a priority. We'll speak with a police officer on the front lines of the fight against deed fraud.


WILLIS: One of the most shocking new trends in mortgage fraud is deed theft. Now, this is something you really have to pay attention to. Even if you've done all the right things with your home, you could still be at risk. Chief Glenn Theobald is from the Miami-Dade Police Department.

OK, first of all, Glenn, if you could just define deed theft for us.

CHIEF GLENN THEOBALD, MIAMI-DADE POLICE DEPT: Certainly. Deed theft is a fraudster that steals the title and the deed away from the homeowner. The way they normally do it is we have an item called a quit-claim deed here in Florida. What they'll do is they will forge a couple of signatures and have a notary public stamp it, and then pay $10 down at the clerk's office and basically take the title right out from under an unsuspecting owner.

WILLIS: It is that easy?

THEOBALD: Unfortunately, it is. That's, you know, an unscrupulous person that's looking to do this.

WILLIS: All right.

THEOBALD: Can do it very easily, in a matter of minutes.

WILLIS: Let's talk about how you can protect yourself. What are the critical things that you need to do to make sure you are not a victim of this?

THEOBALD: Well, a number of things, you need to know -- and access is available through the Internet, you can go down to your clerk's office and find out, find out if there are encumbrances on your property. You certainly know who your mortgage -- the lender on your property and who you pay your mortgage to.

However, other folks can put liens and put items onto your folio that you're unaware of. And if you have access to the Internet, you can check your folio number through our clerk's office and through clerk's offices throughout the state to make sure that there's no pending information that's on there that's detrimental to the ownership of your property.

WILLIS: Wow. You know, it's incredible and the people who are usually victims here are the people who are least able to defend themselves, it's the elderly, racial minorities, people who are in poverty. You know, is this becoming the next big crisis in mortgage fraud?

THEOBALD: Well, we certainly hope not. And by doing this and getting the word out, we hope to prevent this. And, you're absolutely correct. What we've seen is the cases we have come across are folks who have lived in their home for 25, 30 years and they've paid their mortgage off, and they might not have the Internet. You know, I joked about it before that my mom doesn't believe in the Internet and doesn't have a computer, but by not doing that and not having access to it, you kind of shut yourself out for all the information that's available to you and to your property. And predators, they rely on this, because they know that you've been in your home for a while, you have no encumbrances on it and they can actually file the quit-claim deed, go run down to a lender, get a mortgage on that property, and then next thing you know, as an owner, you're receiving foreclosure notices on your property and you don't owe anyone.

WILLIS: Wow, Glenn, thank you for bringing it to us. An important story, wish we had more time to talk about it. But now, at least people know what it is, they can protect themselves. Thank you so much.

THEOBALD: Thank you.

WILLIS: Coming up, the kinds of mortgage scams out there and how you can protect yourself.


WILLIS: We've covered a lot of ground so far on this show, foreclosures, deed fraud, mortgage scams, and we're back now with our panel, Ann Fulmer, Oliver Franscona, and Lynnette Khalfani-Cox.

All right, I just want to get some closing thoughts from you guys, because you are experts on this. Ann, if you could say one thing to the American public about this issue of fraud, what would it be?

FULMER: Be proactive, don't wait until you're in trouble. Go to MakingHomeAffordable, go to HUD, the housing counselors. Take control of your destiny and do it before you start getting the notices of default.

WILLIS: I love that. Take control of your own destiny.

Oliver, what would you say?

FRASCONA: Well, I think she said it very clearly, that the secret is to realize to yourself first, I've got a problem, not be embarrassed about it, and then reach out to the resources which are available, which are more than competent. HUD is fantastic. A bunch of local resources will help. In our state, we have a foreclosure hotline.

But just realize first, I've got a problem coming and then go out and try to work on it. Too many people use the ostrich theory and they think, you know, if I just made it through today, everything's OK. And you got to go out and reach to them.

The last thing I'd say, every servicer is different. The problem is the system is you're not really talking to the bank as you think of it. You're talking to a loan servicer for a fund who is doing it for an investor and all these rules are different. So, you have to be patient, but you also have to follow-up. If you're going to deal with someone, you got to get on it now and work on it every day.

WILLIS: I love that, great advice.

OK, Lynnette, before I move on to you, I just want to say, that's how to get a hold of them. on the Web, they can help you out -- Lynnette.

KHALFANI-COX: Right, the two points I would make are, first of all, if you take help from anybody, a HUD-approved credit counselor or anybody else, don't ever pay hefty, upfront payments. You simply don't have to in order to get a loan modification or a refinance done for your mortgage. Most of the legitimate help that's out there is free or very low cost.

Also, with regard to your mortgage, never sign away the title or the deed to someone. They might talk about a lease-back, letting you rent and stay in the property, claiming they'll work out a deal...

WILLIS: All of those are big red flags.

KHALFANI-COX: They're risky, don't do that.

WILLIS: All right, well, great ideas. And, guys, you know, just one word here as we go, we don't have a lot of time. I'm going to ask for one resource for people, Ann, one resource for people out there to go to.

FULMER: I think if you're going to be proactive one of the places to go is MakingHomeAffordable. It's a Web site that lets you know if you've got a Fannie loan or a Freddie loan, and there are extra resources that you can use to help modify the loan or to refinance it.

WILLIS:, the federal government Web site, great idea -- Oliver.

FRASCONA: Go to your local association of realtors. They're professionals in selling real estate, there in the center of the problem, and they'll give you a list of all the organizations that don't charge upfront fees to help you right up front. Great connection, that local realtor.

WILLIS: Lynnette?

KHALFANI-COX: That's great. The National Foundation for Debt Management,, they're a nonprofit agency, HUD certified, great Better Business record, they can help you out if you're having housing problems and you need to have a third party to help you negotiate with your lender.

WILLIS: And, of course, always, always, Lynnette, and I know you say this a lot, don't be afraid to ask for help, right?

KHALFANI-COX: That's right, that's right. Too many of us are embarrassed about our financial predicaments, we feel I got myself into this hole, I should be the one to dig myself out. We've got to get past that scenario. The scammers, they are correct in telling people there's millions of people out there who are facing this problem, the problem, of course, is that they're trying to fleece people, legitimate people out there do want to help out, though.

WILLIS: Yeah, and they can get it and you guys told us how to do it. Thank you so much.

As always, we thank you for spending part of your Saturday with us. Don't go anywhere, your top stories are next in the CNN NEWSROOM. Have a great weekend.