Minnesotans facing foreclosure need to beware of scam artists offering consultation in exchange for upfront fees, Minnesota Attorney General Lori Swanson said at a Duluth news conference this morning.
Upfront fees for foreclosure consultation are illegal in Minnesota.
"Nobody should ever pay mortgage foreclosure consultants in advance," she said. "They are targeting people already down. They take the money and don't deliver."
Swanson and a small group of state lawmakers are touring Minnesota to warn people against foreclosure scams and to tout the proposed Homeowner-Lender Mediation Act.
Under the legislation, introduced Thursday and co-sponsored by Rep. Roger Reinert, DFL-Duluth, lenders would have to give homeowners the chance to meet in mediation before beginning foreclosure proceedings. The goal is to keep more homeowners in their homes by having them and their lenders renegotiate the terms of the loan.
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"It does Minnesota no good to have more homes empty or in rental," Reinert said.
Foreclosed houses often sit vacant, falling into disrepair or becoming targets for vandalism and dragging down property values in a neighborhood, said Senate sponsor Sen. Ken Kelash, DFL-Minneapolis.
The bill is modeled after a 1980s law that helped about 14,000 struggling farmers stay on the land.
Reinert said the foreclosure issue wasn't high on his radar screen at first, since home foreclosures aren't as common here as in the Twin Cities area. But Duluth is seeing foreclosures in its central and western neighborhoods, the heart of Reinert's district.
In five years, homeownership in Minnesota has slipped from more than 77 percent to 73 percent. The unemployment rate is nearly 7 percent. The economy is forcing more state residents into foreclosure, making them targets of unscrupulous foreclosure consultants.
On Thursday, Swanson filed lawsuits against two foreclosure consulting companies that allegedly charged struggling homeowners big upfront fees and then failed to deliver on promises to save their homes. Swanson has now sued 12 foreclosure consulting companies.
She urges people having trouble paying loans to immediately contact their lenders to try to work out a repayment plan. She also reminded borrowers that reputable mortgage counselors can be found through the Minnesota Housing Finance Agency and the U.S. Department of Housing and Urban Development.
