Ferdinand Bristol, owner of a small home-repair business, lost most of his livelihood in the housing crash and feared his small home on Dewey Street in Hollywood would be next. After seeing a television ad, he turned to Outreach Housing, which enrolled him in a plan that reduced his mortgage payment by almost $500 a month.
What Bristol didn't know was that his money wasn't going to his bank. Behind, broke and frightened, he fears he could be turned out of his home any day.
While legitimate firms can indeed help borrowers wade through the tricky loan restructuring process, housing advocates and state regulators suspect that a large number of businesses offering to help consumers modify their mortgages may be predatory. Some fear that the $75 billion plan President Barack Obama announced last week to subsidize new loan terms for millions of American homeowners will draw even more shady operators to the niche.
In the past two weeks, the Florida attorney general's office fielded 108 complaints from possible victims of foreclosure rescue schemes. The attorney general has sued about a dozen companies, including Outreach Housing, based in Margate.
Earlier this month, a Broward County judge shut the business following lawsuits from the attorney general and the Office of Financial Regulation alleging the company was taking borrowers' money but doing nothing to keep them in their homes.
Blair Wright, owner of Outreach Housing, said the charges are untrue and that his firm legitimately worked to help homeowners.
Loan modification companies offer, for an upfront fee or monthly retainer, to negotiate with lenders to save homes. The pitch includes assurances that billions are available to bail out homeowners – and that lenders are eager to avoid foreclosing.
In the worst cases, the firms do nothing and pocket the money. Others make an earnest but unsuccessful attempt to help, then refuse to refund clients' money. Either way, homeowners lose thousands of dollars they could have paid their lenders.
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