Over 50 refinancing and mortgage modification companies are currently under investigation as part of Arizona Attorney General Terry Goddard office’s crackdown on fraudulent repo home listing rescue services that have been victimizing unsuspecting homeowners who are desperate to save their homes from foreclosures.

Goddard said that his office is investigating the numerous complaints that it has been receiving concerning fraudulent foreclosure prevention schemes. He pointed out that the current main problem of the industry is third-party companies that demand for upfront fees in exchange for helping distressed homeowners modify their loans to make payments affordable and forestall foreclosures.

However, once the fees had been paid, that will be the last time homeowners would hear anything from these fraudulent repo home listing rescue services.

According to the Attorney General’s office, the Better Business Bureau and consumer-protection groups, there is a growing number of fraudulent foreclosure prevention services out there and homeowners should know how to identify these unscrupulous businesses.

Nationwide, the U.S. Federal Trade Commission is also conducting its investigation on fraudulent repo home listing services and has crackdown on entities with deceptive web sites, advertising and business practices.

Goddard pointed out that there are free federally approved, non-profit housing counseling agencies that can provide the same services being offered by foreclosure prevention businesses.

Furthermore, lenders and banks are advising troubled borrowers to approach and talk to them or to any state and federally-approved non-profit housing counselors before trying out private companies that offer loan modification services for a fee.

Jason Merke of Wells Fargo said the bank always encourages troubled borrowers to contact and talk to their lenders directly to work out several options that could help them avoid foreclosure. He added that borrowers should consider housing counseling agencies approved by the Department of Housing and Urban Development (HUD) or the Arizona Department of Housing.

Meanwhile, major banks and mortgage lenders are being criticized for their slow progress in refinancing or modifying distressed loans and for setting up complex systems and confusing protocols for loan assistance.

Some refinancing and loan modification companies are located in Arizona while others are based outside the state and have accessed to troubled and delinquent loans in Phoenix, one of the cities in the country with high number of repo home listing.

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Positive reactions on the foreclosure prevention initiative from mortgage professionals, local realtors and builders were noted a day after US President Barack Obama unveiled his program.

Obama’s initiative, intended to streamline the number of foreclosed homes in the country, will allow lending institutions to reduce interest rates that would lower monthly mortgage payments to not more than 38 percent of the homeowners’ pretax income

Under the $75 billion plan, the federal government will match reductions that lenders will make to lower the mortgage payment to as much as 31 percent.

Despite the lack of details on how the Obama Administration will implement its loan modification program included in its foreclosure prevention plan, some homeowners who lost their jobs are hopeful that the initiative will bring the much needed respite that will allow them to continue paying their monthly loan payments.

Meanwhile, some mortgage professionals, local realtors and builders have expressed their support for the plan to end foreclosures.

Shore Mortgage President Robert Rahal said that the initiative is expected to help about 5 million homeowners whose mortgages are way beyond the fair market value of their properties but are making refinancing payments at reduced interest rates.

The initiative provides incentives to mortgage servicers to encourage them to offer loan refinancing to owners of distressed properties. Mortgage servicers will receive $1,000 for every eligible loan modification. In addition, the government will also provide mortgage servicers $1,000 annually for three consecutive years provided that homeowners remain current on their mortgage payments.

On the part of homeowners, they will also receive a balance reduction as much as $1,000 annually for five consecutive years provided that they pay their mortgages on time.

Independent Bank Corp. Senior Vice President Russ Daniel pointed out that the foreclosure abatement plan will encourage banks to offer loan modifications. He added that the initiative to help reduce the number of foreclosed homes will benefit almost 7 million Americans.

On the other hand, Coldwell Banker Schweitzer associate broker George Smale explained that any program that will help homeowners stay on their properties and avoid foreclosure would go a long way in helping stabilize housing prices.

The drastic decline in home prices has greatly affected banks and other financial institutions, making them less able to provide loans.

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Under President Obama’s foreclosure plan, first-time homebuyers will be given up to $8,000 in tax credit, which they can claim in their returns for 2008 or 2009. The exact amount is the lesser value between $8,000 and 10 percent of the value of their home.

What is especially great about the tax credit is that first-time homebuyers can claim the $8,000 as a refund on their 2008 taxes. They also receive the full amount of $8,000 tax credit even if their tax liability for 2008 is less than $8,000. They can then use this $8,000 to add to their downpayment on a house.

To be eligible for the tax credit, first-time homebuyers must buy their homes between January 1, 2009 and November 30, 2009. Taxpayers are considered first-time homebuyers if they have not owned a house since 2006. They must also commit to live in the home they buy for not less than three years, otherwise they will have to return the $8,000 tax credit.

The credit is also restricted to taxpayers with gross incomes of less than $75,000 for individuals and $150,000 for couples. Homebuyers earning above these brackets may be given a partial credit. The process of application for the $8,000 home-linked tax credit has been made easier for the homebuyer. Homebuyers just claim the credit on their 2008 tax returns. For those who have already filed their returns, they can amend their returns to claim the tax credit.

Although people in the housing industry are generally pleased with the $8,000 credit, they are still disappointed that the Senate and House did not pass the proposed credit of $15,000 to all homebuyers. Bernard Markstein, an economist with the National Association of Homebuilders (NAHB), said the $15,000 credit would have helped more homeowners and would have revived the foreclosure-laden housing market faster.

Nevertheless, as economist Lawrence Yun has expressed, the $8,000 credit would add about 300,000 new buyers into the housing market loaded with foreclosed properties. He also said that the credit would start a domino effect in the market, with the first-time homebuyer buying a home sold by someone also buying another home.

In real estate lecturer Mark Goldman’s opinion, many people wanting to buy a home would not be able to benefit from the $8,000 credit because they do not have the down payment needed to buy a home, even a low-cost foreclosed home.

Even so, Yun added that the $8,000 could be treated as a reduction on the cost of a home, or an initial home fund from which new homeowners will get money to pay for repairs or appliances, things that could start an increase in consumer spending that helps stimulate the foreclosure-burdened economy.

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In an effort to help prevent more foreclosures, the Federal Housing Finance Agency (FHFA), the overseer of the government-controlled Freddie Mac and Fannie Mae recently announced that a new Home Valuation Code of Conduct will take affect this coming May. The new plan was created to ensure the correctness of home appraisals of mortgages from both companies and to curb mortgage fraud. According to policy makers, overvalued homes have been one of the leading causes of foreclosures.

Foreclosures may happen when homeowners go to honest mortgage companies and find out that the original appraisal from a previous company would be much more than the actual home value. Thus, they would find themselves owing more mortgage than what the property is worth.

For homeowners who are victims of foreclosures and are seeking for refinancing, high appraisals would automatically eliminate the option of selling or refinancing since they have less equity than they originally thought.

Incomes of loan officers and brokers depend on the number of approved mortgage loans. Sometimes, these lenders exert pressure on appraisers to hype the appraisal, ensuring that the collateral is much more than the loan, and thus reducing the bank’s risk.

Extreme cases of pressure on appraisers show that lenders may threaten to hurt families or deprive appraisers of clients. In 2007, a survey by October Research showed 90 percent of appraisers felt pressured by loan originators. Last year, over 250 appraisers lost their licenses due to inaccurate and inflated appraisals.

However, the National Association of Mortgage Brokers has expressed dissatisfaction with the FHFA plan, saying that existing regulations should instead be strictly enforced.

Still, records show that only 15 states have laws holding loan originators accountable for pressuring home appraisers. The Appraisal Institute reports that these laws are seldom enforced.

The new regulations are expected to have a positive effect on the housing market and would help alleviate the country’s foreclosure problems.

Efforts by FDIC Chairman Sheila C. Bair to persuade President George Bush’s administration to help homeowners in danger of foreclosure are finally getting results. Bair’s loan modification plan is said to be nearing approval at the White House of Management and Budget.

Bair’s scheme aims to help about 3 million homeowners who are likely to get foreclosure notices in 2009. Their mortgage loans would be modified using a model similar to what was successfully implemented by FDIC to help distressed borrowers at IndyMac. The program will generally target troubled borrowers who were enticed to take out mortgage loans with adjustable rate mortgage (ARM) options, Alternative-A mortgage options or with other clauses that they did not fully comprehend.

If approved, the program will be given a budget of about $40 to $50 billion, which will probably come from the second half of the $700 billion foreclosure prevention plan approved by national legislators in October 2008.

Bair’s plan asks the federal government to guarantee up to 50 percent of losses that would be incurred by mortgage servicers and investors in case borrowers who avail of loan modifications default again. Loan servicers would also be paid for their processing activities. To help ensure that borrowers will not become delinquent again, the scheme requires the loans to be modified so that monthly amortizations would drop to about 31 percent of gross monthly income.

Other possible ways to increase affordability and help prevent foreclosure are reduction of mortgage interest rates and extension of loan terms to up to 40 years.

According to Credit Suisse, over eight million foreclosures will be filed over the four-year period beginning 2009 if there is no intervention. Credit Suisse said that its foreclosure figure includes nearly 60 percent of all subprime mortgage loans and more than ten percent of adjustable rate mortgages, Alternative-A mortgages and prime mortgage loans.

Foreclosure rate in the US is continually rising to this date. More than 250 families are evicted from their homes every month. Although there is available assistance from different sectors of the society, most families fail to take advantage of them.

To prevent losing their property, families must immediately take action when mortgage troubles start coming in. Here are some tips:

1. Do not neglect the situation. Not taking any step will do nothing but worsen the problem. If you do not act at once, the chance that you might lose your home increases.
2. Get in touch with your bank lender the moment you recognize you are facing foreclosure. Explore the different options they offer to get you through your financial problem.
3. Anticipate mail from your lender. Once you receive one, open immediately and answer back. These mails contain helpful information on how you can prevent foreclosure.
4. Be informed about your mortgage rights. Go through your mortgage documents and read about the terms of your mortgage.
5. Know your options on foreclosure prevention. You can find practical information on the internet.
6. To help you understand necessary information, seek the help of a non-profit housing counselor. There are those funded by the US Department of Housing Urban Development.
7. Use your money wisely. Set priorities for spending. Check your budget and see which costs you can do without and which payments you can defer.
8. Maximize what you have. You might have assets which you can sell. Also, there might be members of the family who can take a second job.
9. Be guarded about foreclosure prevention companies. Some of them collect a big sum for information that you can get for free.
10. Do not be fooled by foreclosure recovery claims, those who make homeowners believe that they can stop foreclosure. Without you knowing it, you might already be transferring ownership of your home to them.

To combat and somehow slow down the growing problem in the mortgage industry, a new foreclosure rescue plan was launched in Washington.

Dubbed “Help Now”, the foreclosure rescue plan was actually formulated by the National Community Reinvestment Coalition, a non profit advocacy group. The plan involves asking the government to buy distressed mortgages and restructure them so that they become more affordable. Once restructured, these loans can now be sold in the secondary market.

“Help Now” also aims to complement the efforts exerted by Hope Now, which is an alliance of mortgage servicers, lenders, investors and non profit advocacy groups in different communities established to assist troubled home owners and help them find a way to keep their homes.

According to the NCRC, the Help Now plan will provide lenders with a way to change the terms of the distressed mortgages. Not surprisingly, this plan was created with support from major lenders including Wells Fargo, Bank of America, JP Morgan and Washington Mutual.

Compared to the recently passed plan to stimulate the economy, Help Now actually involves only about $20 million in seed money. Even NCRC believes that this cost is much cheaper compared to the billions in losses that the government might incur if the foreclosure crises worsen.

From the vantage point of consumers, Help Now can actually provide one of the answers to the present financial troubles of the nation. The problem with the mortgage industry can not be ignored any longer. Since the crash of the housing market most likely originated from this industry, it is only right that the government address it.

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Last week, the chairman of the Senate Banking Committee Chris Dodd sent a letter to President Bush, urging him to concentrate on looking for solutions to the enduring foreclosure crisis. The letter also contained criticism about the way the Bush administration handled the problems in the housing industry.

Dodd’s letter comes after unconfirmed report regarding a program designed to reduce the number of homes entering some foreclosure stage. If the reports are indeed true, the committee chairman believes that the government, particularly the Treasury Department, should act swiftly and aggressively.

But some government officials do not consider the problems in the housing industry to be the reason why the country is having economic issues. Instead, they are looking at the mess in the credit and financial industries as the root cause.

In addition, the government has already started considering other solutions to the foreclosure crisis on top of all the efforts made to stop foreclosure — the latest of which is the $300 million Hope for Homeowners program implemented last October 1.

According to Time magazine, there are actually two plans that the government is looking into. The planning involves officials from the Federal Deposit Insurance Corporation, Treasury Department, the Department of Housing and Urban Development and other government agencies.

The first plan is said to be worth $50 billion and would be used to guarantee the mortgages of troubled Americans. The other plan would involve the expansion of existing housing rescue programs presently under the Department of Housing and Urban Development.

Based on year-over-year data, national foreclosure rate has risen by 21 percent, with one filing for every 475 homes. If the government fails to realize the seriousness of the situation, there will be hundreds of thousands of Americans who will be left homeless because of foreclosure in the coming months.

In the last couple of years, the entire nation has been suffering from the effects of the enduring foreclosure crisis. With the housing market brimming with literally millions of homes in some stage of foreclosure, it is not surprising that there is also a growing number of foreclosure-related scams being reported nationwide.

The individuals, who perpetrate these foreclosure scams, usually target distressed homeowners who are quite desperate to solve their mortgage problems. In most cases, they immediately believe anyone who will offer them an easy solution to stop foreclosure. These troubled borrowers do not stop and think about these offers are oftentimes, ignore the warning signs.

The most common of all foreclosure scams involves a promise that all your foreclosure worries will disappear in exchange for a small upfront fee. But as soon as this fee is paid, the individual disappears without a single trace – leaving you alone to face foreclosure once again.

Some scam artists go to the extent of setting up a fake “lease and buy back” agreement. You will be asked to transfer the property’s title in the scammer’s name but still stay on as a tenant. After a certain period, you can choose to buy back the property. Of course, the scam artist will only borrow heavily against the equity you have left in your home and as soon as there are none left, these unscrupulous individuals will disappear. Avoiding these foreclosure scams is actually easy. You just need to be vigilant whenever a suspicious person approaches you, offering a simple solution to your mortgage problems. Many housing advocates have always insisted that distressed homeowners discuss their problems with their lenders or legitimate foreclosure counselors.

Even if it seems that what these scam artists are offering are quite irresistible, you should consider the fact that most of them will tell you that you do not have to do anything in return. That alone should trigger warning bells in your head since there is no such thing as “no strings attached”.