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Struggling homeowners at risk for mortgage relief scams

Many homeowners are familiar with the offers they get in the mail advertising mortgage relief or refinancing programs. Some of the offers seem too good to be true, and a recent action by the Federal Trade Commission suggests that they are not true.

One of the companies being sued by the FTC was inducing mortgage holders to enter a "mass joinder" suit, which is similar to a class action lawsuit. The offers frequently focus on refinancing or resolving disputes with lenders. The companies asked homeowners to pay between $6,000 and $10,000 and in many cases provided nothing or very little in return. For people facing foreclosure, this can cost both precious time and money. A nonprofit group estimated that homeowners have lost more than $60 million in the past two years from these scams.

The firms are apparently posing as lawyers. However, there are some tell-tale signs that consumers can watch for to discern the difference between a real lawyer and a scam. Particularly, a lawyer should never make a promise or a guarantee. Attorneys can assess a case and offer an opinion on the outcome, but promising a specific amount of money is not permitted. Consumers who have questions about whether or not someone is a licensed attorney can check with the state bar association.

Homeowners who are struggling to negotiate with their bank should contact an independent attorney before they make a decision about joining a class action lawsuit. Each person's situation is different, so it's important to get honest legal advice from someone who knows the facts of your individual case.

Source: New York Times, "Avoiding Mortgage Relief Scams," Vickie Elmer, April 19, 2012.

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