By Ellen Yan
To thwart foreclosure rescue scams, two New York state senators think something in 12-point, bold print or bigger will help do the job.
Senate Deputy Majority Leader Jeff Klein (D-Bronx/Westchester) and Sen. Brian X. Foley (D-Blue Point) are sponsoring a bill that would require for-profit loan modification firms to prominently display or showcase a sort of public service announcement on their advertisements. If the ads are in print or online, the announcement must be in bold and in at least 12-point size, which is about one-eighth of an inch.
Here’s the bold note: “In New York state, housing counselors, who are approved by the U.S. Department of Housing and Urban Development or the New York State Banking Department, may provide the same or similar services as a distressed property consultant for free. A list of approved housing counselors can be found on the New York State Banking Department Web site at www.banking.state.ny.us or by contacting the New York State Banking Department toll-free at 1-877-BANK-NYS (1-877-226-5697). You are strongly advised to consult with a government-approved housing counselor before signing any distressed property consultant contract.”
Many loan modification companies, also called distressed property consultants, cropped up practically overnight to sell their services to troubled homeowners, saying they could reach lenders and negotiate changes to the mortgages to save the homes. Such firms are not supposed to charge fees up front, but some have and others have taken the money and done little for borrowers. Some homeowners have even lost their properties.
An aide for Klein, who came up with the bill idea, said other lawmakers have voiced interest in sponsoring the measure. Foley said the legislation will be a major step in keeping vulnerable borrowers from wasting money when they're already in trouble.
Public officials have urged homeowners to take advantage of free counseling and loan modification help from nonprofits. Last year, the federal government allocated millions of dollars to housing advocates and nonprofits to beef up help for borrowers.
Some lenders and loan servicers have special phone lines reserved for housing nonprofits, and others said they are more likely to work with nonprofit advocates helping borrowers.