Beware Of Foreclosure Scams

Like many homeowners facing foreclosure, Sandi Stewart says she'll do just about anything to keep her Lakeland home.

So in February, when she saw a television commercial from a California lawyer advertising help with mortgage loan modifications, she called. The company agreed to take on her case - as soon as she gave them a credit card payment of $3,500.

"Because it was an attorney, I thought it was more secure," said Stewart, who paid all of it upfront. "I know now it doesn't sound very smart, but I didn't know what else to do."

Company representatives, she says, tell her they've had no luck so far. Stewart is still hoping they come through, but she's starting to wonder whether she wasted money she could have spent on mortgage payments.

She'll find out soon, but the most alarming part of the story is the fee.

It's against the law in Florida to charge upfront fees for foreclosure help. The law was passed a year ago, but many companies still won't begin work until they get the money. And an increasing number of them aren't doing anything in return. Florida's attorney general has called the situation a "state of emergency."

Does the law have a loophole?

Federal and state authorities are investigating, prosecuting and shutting down companies that violate the law. But some have found what they think is a loophole in the law: Florida attorneys are exempt from the ban on charging upfront fees.

When Stewart questioned the fees, she says she was told it was legal because she was hiring an attorney.

However, she had no correspondence with the lawyer and spoke only to the "loan modification department." Plus, the lawyer, Christian M. Dillon, is not licensed in Florida.

Repeated phone calls to representatives for the company, uFirst Direct, and for Dillon himself, were not returned.

The attorney defense for charging upfront fees is not an isolated case.

Another reader called recently about a Chicago company, American Homeowners Alliance. It asked for $1,500 up front.

When reached by phone, the company president, Jim Hamilton, told me he was aware of Florida's law but that it doesn't apply to him because his company is based in Illinois.

Furthermore, he said, his company is exempt from Illinois' law against upfront fees because he has an attorney on staff.

"This is how I do business because I've been beat out of $3,000 in the past by people not paying," Hamilton said. "Two of those homeowners were in Florida."

"Would you do this kind of work without getting paid for it first?" he asked.

That point is understandable.

The attorney general has not received complaints about Hamilton's company. However, the attorney defense for charging upfront fees just doesn't hold up, according to regulators.

Offices for the attorneys general in Florida and Illinois say companies operating in Florida must obey local laws, no matter where their home office is.

"Merely having an attorney on staff, even assuming he is licensed to practice in Florida, is not enough to qualify for the exemption, said Sandi Copes, communications director for the Florida attorney general. "There must be an attorney-client relationship established before the exemption applies."

Make sure you get what you pay for

St. Petersburg lawyer Matt Weidner said many of his clients have been to foreclosure rescue firms before hiring him.

"I had two clients recently that each paid $1,500 to a company that said they could make the foreclosure go away," he said. "The companies ended up coming back and asking for more money."

Some clients have also received advice from firms that ended up making it more difficult to work with lenders, Weidner said.

The bottom line is this: Seek out free help from local nonprofit groups before agreeing to pay for help. And if your situation requires more work than offered for free, do your research.

If you hire a rescue company, don't pay a dime until you actually get what you're paying for.

If you think you've been a victim of foreclosure rescue fraud, call the Florida attorney general's hot line at 1-866-966-7226 or go to http://myfloridalegal.com/ mortgagefraud, which provides complaint forms and tips to identify and avoid fraud.

To find HUD-certified housing counselors - who work for free - call 1-888-995-HOPE.