Be afraid. Be very afraid! (Make sure that deal is good for YOU and only you)

This week, we got a familiar phone call: 

Homeowner:  I responded to an ad on TV that said that they were helping run the ‘Obama plan for Mortgages’ and they would knock my payment down by ½.

Consumer Courage: Did you meet w/anybody?

H/O: No, they had offices in Chicago and Nevada.  They were very nice over the phone.  I gave them all of my financial information (Social Security Number, Date of Birth, and such)  and sent them a check for ½ of my monthly payment. They said they were going to put it in escrow and then talk to my mortgage company about getting a deal.  And that they were part of a government program.

CC: Didn’t your mortgage company say anything when your payment didn’t arrive?

H/O: Oh yes.  They called me right away.  When I told them what I was doing, they said that they hadn’t received anything. 

CC: How long has it been since you’ve made your last payment?

H/O: About 4 months.  I wasn’t even behind. But, the ad said that they could knock my payment down by ½.  Now, the company from the TV ad has shut off their phones and I have no way to reach them.  The bank says they are going to put me into foreclosure.

CC: Oy vey.

Unfortunately, this happens all the time.  Some company promises the moon on a TV ad, or in a radio spot – the info is part half-truth, part-wives tail and part internet-fear.  All they need is a consumer who is just a little too trusting for their own good.   The shame of it is, this poor woman wasn’t even behind when she responded to the ad.  Now, at 68, she blames herself because she fell for a scam that is run by some very nasty, remorseless folks who view money taken from somebody’s Nana as righteous bucks. 

What could she have done?

We think that ‘Be More Skeptical’ isn’t really advice. (more to the point, it’s probably actually advice. The problem is, the only people who will listen to this advice are already skeptical…)  However, there are practical changes that could help somebody who is wrestling with the idea of whether or not to send people like this their money.  

    • TV & Radio Ads contain lies – Don’t ever forget this.  Advertisements & ad-campaigns cycle through production, airing and to the scrap heap waaaaay to quickly for there to be any meaningful inquiry into whether the claims they make are true or not. Is the truth being stretched or fantasized?  The answer isn’t so clear.  What IS clear is that your first bit of research on anything should be to remind yourself to be very reluctant to believe claims that are made in an ad;
    • Ask a friend – Don’t underestimate how much benefit there is from saying this phrase to a friend that you trust “Hey, can I bounce this off of you?  Does this sound like a good idea?”  What this does it give you two perspectives on what you’re about to do.  You hear what a trusted friend thinks and you get to hear it come out of your own mouth.  Too often, once we brand something as ‘good news’ (like a sweet new deal on a type of milkshake that will cause us to drop weight that we’ve been carrying around since the mid-80s) our minds filter out the warning flags that are on the road to decision-making.  Hearing yourself say it out loud will give you one more chance to test out the idea on the BS meter.
    • Do SOME research – Check out
      • Government agencies – For starters, your State’s Attorney General and The Federal Trade Commission both compile lists of people who report that they’ve been scammed.  They can also tell you if the company that you’re dealing with is supposed to have a license to operate inside your State.  If they have to be licensed, you can call THAT other agency and see if they are.  Having a license doesn’t mean that everything about you is legit.  But, if they don’t have the license that they are supposed to have, it can be a red-flag.
      • Non-Profit Watchdogs – To name a few: Better Business Bureau, National Association of Consumer Advocates, Consumer Federation of America, Center for Responsible LendingNational Consumer Law Center all have valuable insight on scams, Consumer Rights and bad guys.  They don’t know all of the scammers who are out there, but they can probably tell you whether what you’re about to do sounds more like you are about to buy magic beans, than the thing that’s gonna solve all of your problems.
      • Try Googling the name of the company you want to deal with and add the word ‘Scam’ or ‘Ripoff’ and see what comes up.

What could we all do to stay away from these scammers?

    • 1.  Start acting paranoid. We don’t mean you should wear sunglasses and never take the same route to work twice. We mean that you should start thinking “How can this go south?” and “if it does, how bad could it be for me?”  Rethink your willingness to spend and to ‘go along with things.’  As the price goes up, your willingness should go down.  If the claim is ‘this is the best candy bar ever!’ you don’t have to be too skeptical.  If you make a mistake, you’re only out a dollar and a half.  But, if the claim is ‘this investment opportunity is once in a lifetime!’ and what your risking is all of your savings or exposing our Social Security number, slow down and give in the desire to worry. 
        • Editor’s Note of motherly advice: the official Mom of Consumer Courage always says “You have to know when to worry.”  Indeed.  Don’t worry about buying the wrong candy-bar.  DO worry about whether or not there will be a problem if you divert your mortgage payment to some voice on the phone who you’ve never met 8 states away.
    • 2. This one’s a two-parter: Don’t act until you have the whole story AND Understand that the pitchman/salesman is only telling you half of it. One thing that all scammers have in common is that they talk fast, use carefully crafted language that includes just enough ‘internet wisdom’ to grab you and are going to say anything to get you to say ‘YES.’ Your job is to wait and make some effort to see for yourself. 
      • Did they say they were helping manage some new ‘Obama mortgage plan?’ Great! After you get them off the phone, go on the net (or call somebody at some government agency) and look up the plan.  Does it exist? Which ones are the places that are actually ‘helping the government?’ Does the REAL Federal Mortgage Help Program involve stopping your mortgage payments and depositing half of the amount into somebody else’s account?
      • Remember: The idea here is that you learn NOT to take the saleman’s word for it. 
    • 3.  Time is your friend: quick action is your enemy – if they have a problem with the phrase “I have to sleep on it. Let me think about it and I’ll call you back,” there’s something wrong.  The only hurry is for the scammer to hurry and get your money, before you get wise.  They know that you really want to believe them.  Why? Because (like our homeowner) you called THEM, which means that you fell for the ad. (or if they called YOU, they know you want to believe – because you haven’t hung up yet). 
    • 4.  When can we meet – one of the problems with the internet is that our system for deciding who to do business with is all out of whack.  Twenty years ago, nearly everyone would have been afraid to give personal financial information out over the phone to somebody across the country who we weren’t ever going to meet.  Now? It’s what’s expected.  Keep this in mind: the more money it could cost you the more necessary it is for you to find, meet and touch the person you are paying.  If they have an office, you can at least drive there if you feel you’ve been ripped off.  If the office is ‘somewhere in Nevada,’ good luck with that.  (it also goes much better in your report to the police if you can give them a local address)
    • 5.  If THEY started the call – don‘t tell them anything at all!  They could be anywhere working for anybody.  “Send me something in the mail and I’ll take a look at it” is the antidote to unsolicited calls seeking your personal info.
    • 6. Let’s exchange information….You first! – we’ll keep on saying this: your social security number, date of birth, account number and credit card number are all gold to you.  If I pulled up to you on the street, rolled down my window and asked for you to empty your wallet into my lap so I could drive away and never call you again, would you do it?  Of course not.  So why should this thinking change because you’re on the phone?  Even if you’ve been on the phone w/them for an hour, they helped deliver your grandson (AND used to have dinner with Mother Theresa) don’t give them anything until they give you basic information.  Expect them to give you their:
      • a. Their own name;
      • b. The company’s name;
      • c. Address;
      • d. Phone Number;
      • e. E-mail;
      • f. The deal they want you to agree to IN WRITING, on official letterhead;
      • g. Their website address
        • But Remember:  anyone with opposable thumbs and a hundred bucks can make a website.  Look at how much information their website has.  If there’s a ton of promises and flowy language, but no information on the people who work there or how to get ahold of them, there’s a problem.

Remember, until you pay, you have all of the power. Once the money is in the mail (or on its way) much of that power turns to ether. 

Posted by Mark Wiseman (who really DOES have a Mother….and she really DOES remind him what to worry about) 

October Surprise! Ohio Homeowners get a (rare) victory in the foreclosure fight.

(Part one of a series, examining The Schwartzwald case)
For the first time in a long while, Ohio’s homeowners have a reason to celebrate.  The Supreme Court ruled this week on a case that will impact the foreclosure industry and Oh, it’s a doozy.

First, a little background:
For years, homeowners who were sued in foreclosure – and the attorneys who fought on their behalf – couldn’t help but wonder if their cases were being conducted under a separate set of rules.  In a normal lawsuit, either party would get the chance to find out all they wanted to know about the other side’s case.  This is called the Discovery Process.  ‘Show us all of your evidence’ was a question that somebody suing your client had to answer. 
In any other type of lawsuit, the Discovery process would give you the chance to get answers to basic questions about the other side’s case and to use those answers to defend yourself.  Not so in ‘Foreclosure World,’ that alternate reality where homeowners could only act as spectators, while they could only watch as their houses were sold at auction.   
The most glaring example of the different set of rules came to light almost two years ago, with the unveiling of the ‘Robo-signing’ scandal.  That’s when the curtain was pulled back on the Foreclosure crisis to reveal a Wizard that was much more sinister and calculating than even the most cynical of the advocate community could have imagined.  Simply put, tens (maybe hundreds?) of thousands of sworn statements submitted to Courts all across the Country (statements that are used as the single piece of evidence to prove that the homeowner is in default and should lose his house) were either signed by someone else, contained outright lies……..or both. 

If I owe somebody else, why are you allowed to take my house?:
Imagine going to a concert and telling the usher who asked to see your ticket, “Don’t worry bro, I’ll get you a ticket at some point before the show is over……trust me.”  If you tried this, you wouldn’t be at the concert very much longer.  However, this worked with foreclosure cases.  Banks have routinely filed foreclosure cases, even though they were unable to come up with the paperwork that proved that they were the ones that were owed the money.  They argued that this was a minor glitch in an otherwise righteous process.  They had the right to sue…….we just didn’t understand how everything worked.  They wanted the Courts to ignore the fact that this made it harder for homeowners to stay in their homes; more likely that homeowners could be sued multiple times for the same mortgage and likelier that the information that was being submitted as evidence was simply not reliable.  And so it went….
….Until now.  The Ohio Supreme Court has removed one of the other major hurdles created by the ‘separate set of rules’ that exist for foreclosure cases.  Every Court in this Country has a simple rule about filing a lawsuit – you can sue somebody, as long as what happened, happened to you.  It’s referred to as ‘Standing’ and if the Court determines that you don’t have it, your lawsuit gets dismissed.   
Enter the foreclosure process.  Because promissory notes and mortgages are passed between Banks, Trustees and Servicers like trading cards, losing track of exactly who has the note, or exactly who owns the mortgage is all part of the game.  They may not know who you owe the money to; but they know you owe the money! So, foreclosures are filed, before the banks can get their hands on all of the actual ‘details’ (such as the name of the party who has the right to sell your house, or the paperwork that shows that they were the ones who bought your promissory note and mortgage). 
The first Court to get wise to this game in Ohio was the Federal District Court in Cleveland.  In what has become known as the Boyko decision (so-named after the Federal Judge who issued the ruling), the banks were told not to bring their foreclosure cases to play in the Federal Court Sandbox, if they couldn’t prove who owned the mortgage before the complaint was filed. The banks argued that it didn’t make sense to prevent them from foreclosing, just because they couldn’t come up with the paperwork to prove that they had standing at the beginning of a case, as long as they were able to prove it at some point before the Court issued judgment on their behalf.   During the years since the Boyko decision in 2007, foreclosing banks filed their cases in the State’s Common Pleas Courts, most of which were eager to allow them to file their cases, even though they could not prove that they had ‘Standing to Sue’.  

But Wells Fargo told me not to worry:
Duane and Julie Schwartzwald bought a house in Xenia, Ohio in 2006.  In 2008, Duane lost his job and they made plans to move to Indiana.  They were able to make payments on the old house for a few months after they left, but eventually fell behind.  In the spring of 2009, Wells Fargo agreed to accept a short-sale and the Schwartzwalds found a buyer.  Incredibly, only one week after they had entered into a sales contract (somebody other than Wells Fargo) the Federal Home Loan Mortgage Corporation (aka Freddie Mac) filed a foreclosure.  The folks at Wells Fargo who had been working with the Schwartwalds on the short sale told them ‘not to worry’ and that it was ‘standard procedure’ in a short sale.  Unfortunately, a foreclosure filed against the property you are about to buy is one of the events that is certain to scare off a potential buyer.  (This case was no different, as the buyer got cold feet and backed out of the sale, leaving the Schwartzwalds in a much worse position)   
There was one little problem with Freddie Mac’s case, though.  They didn’t have the piece of paper that proved that they bought the Promissory Note and Mortgage from Wells Fargo.  This piece of paper is called an ‘assignment,’ and it was nowhere to be found.  Whether or not Freddie Mac should be allowed to continue with the case was the centerpiece of the argument.  The Schwartzwald’s attorney argued that: Since they didn’t have an assignment, they did not have standing to sue and the case should be dismissed.   Freddie argued: that they should be allowed to proceed with the foreclosure and that sometime before the case was over, they would be able to show that they were the right party to be bringing the lawsuit.   Just like our concert-goer without a ticket, they promised to have one, before the music ended.   The trial and appeals Courts both agreed with Freddie Mac and upheld the judgment, taking the house away from the Schwartzwalds. 
The Ohio Supreme Court put a stop this practice (and Freddie Mac’s case) this week, when they issued their ruling in the Schwartzwald case.   In Ohio, a bank is no longer allowed to start a foreclosure case, before they have the documentation that proves that they have the right to sue.  (if this was the rule three years ago, the Schwartzwalds would have been able to go through with their short-sale and would have been spared the years of anguish that accompany a lawsuit) From now on: If the bank cannot prove that they are the owner of the Promissory Note and Mortgage, before they file their foreclosure complaint, their case will be dismissed.  To be sure, this case raises many questions.  One of the most important is the effect it will have on judgments that have been granted in the thousands of foreclosure cases without proper assignments that were filed before Schwartzwald.  Next week, we’ll dive in to the legal arguments and the reasoning of the Court.  But for now, Ohio’s homeowners can breathe a (slight) sigh of relief!

Posted by: Mark Wiseman