- In this report
- Overview
- Foreclosure come-ons
- Hard-sell reverse mortgages
- High-fee debt settlement
- A credit card for anyone
- Uninsured savings accounts
- Faces of foreclosure: Video report
- Also in This Issue
This article was featured in the March 2009 issue of Consumer Reports Magazine.
Financial traps are flourishing
Tough times have bred five costly come-ons
First-time homeowners Kari and Roger Mizer of Springfield, Ill., faced foreclosure on their home in 2007 after the monthly payment on their adjustable-rate mortgage hit $1,850. It was just $900 when they bought their house two years earlier.
Frustrated after being turned down for refinancing by more than 40 lenders, the Mizers had hope when they received a letter from a mortgage-restructuring firm that claimed to have a 95.5 percent success rate in stopping foreclosures. "As a member of the Better Business Bureau, you can trust us and avoid numerous dishonest scams," said a letter they say they received from Augustus, Rae and Reed, based in St. Marys, Pa.
The Mizers checked with the Better Business Bureau and found no complaints. So the couple said they tapped Roger's 401(k) retirement plan in May 2007 to pay the firm's up-front fees of $1,347. "They told us we shouldn't communicate with the mortgage company anymore because they would do that instead and work out a repayment plan to save our house," says Kari Mizer, a school food-service worker. When she began getting calls a month later from the mortgage lender about foreclosure proceedings, she was told that the firm had never contacted the bank. The Mizers' home was put up for sale by the court around Christmas 2007 and auctioned off. They are now renting a house.
"All of the people who we talked to about refinancing or finding some way to keep our home acted like it was no big deal, that it's just a house after all. But this was our home, and I cried for days because losing it was like going through a death in the family," Kari Mizer says.
When the economy falters, it's prime time for ploys that claim to help consumers out of money messes.
"No matter how down and out consumers are, someone always finds ways to take even more from them," says Norman Googel, an assistant attorney general in West Virginia, a state that has successfully pressed charges over abusive financial services during the past two years.
We've catalogued five kinds of troublesome offers being promoted right now. One of the common themes: Their financial fine print could leave you in even worse shape than before.
