HELP FOR NEW YORK STATE HOMEOWNERS
Beware of Loan Modification Scams
Loan modification specialists, known as distressed home loan;
“distressed property consultants” in New 4. Obtain any extension of the period within
York law, are for‐profit individuals and which the homeowner may reinstate or
companies who offer to help homeowners otherwise restore his or her rights with
who are in default or foreclosure for a fee. respect to the property;
The fees can be very large — $2,500, $5,000, 5. Obtain a waiver of an acceleration clause
or even more — and many of these are scam contained in any promissory note or
artists who never deliver on their promises contract secured by a mortgage on a
and just take the homeowner’s money. property in foreclosure;
6. Assist the homeowner to obtain a loan or
In 2008, New York passed a very strong law advance of funds;
regulating distressed property consultants. It 7. Assist the homeowner in answering or
is important to know your rights under this responding to a summons and complaint,
law (NYS Banking Law section 265‐b). or otherwise providing information
regarding the foreclosure complaint and
What “consulting services” are covered process;
under the law? 8. Avoid or ameliorate the impairment of the
“Consulting services” means services homeowner’s credit resulting from the
provided by a distressed property consultant commencement of a foreclosure
to a homeowner that the consultant claims proceeding or tax sale; or
will help to achieve any of the following: 9. Save the homeowner’s property from
1. Stop, enjoin, delay, void, set aside, annul, foreclosure or loss for nonpayment of
stay or postpone a taxes.
foreclosure filing, a What To Do If You Think
foreclosure sale, or the You’ve Been Scammed What does the law
loss of a home for Visit www.loanscamalert.org for prohibit?
nonpayment of taxes; details on how to spot a scammer Distressed property
2. Obtain forbearance from and see a list of trusted resources. consultants are
any servicer, beneficiary prohibited from taking
or mortgagee or relief To report a suspected loan any upfront payment,
with respect to the scammer, you can: before the full
potential loss of the Go to www.loanscamalert.org completion of all
home for nonpayment of Call the Federal Trade services promised.
taxes; Commission (FTC) at 877‐FTC‐ Consultants may not
3. Assist the homeowner to HELP (1‐877‐382‐4357) or provide services unless
exercise a right of Contact the New York attorney there is a written
reinstatement or similar general’s office by email at agreement, or contract,
right provided in the NYSHOMES@ ag.ny.gov or with the homeowner.
mortgage documents or phone at 1‐800‐771‐7755 Consultants may not
any law or to refinance a take power of attorney
This information is made possible by NeighborWorks® America, and
was developed by the New York State Coalition for Excellence In
Homeownership Education (CXHE) and the Empire Justice Center.
for a homeowner. address of the consultant, and a disclosure
Consultants may not keep original letting the homeowner know they should
documents that belong to the consider consulting with a nonprofit housing
homeowner. counselor in New York. (This disclosure is
spelled out in the law.) The agreement must
A Written Contract is Required be signed and notarized.
Before providing services, the borrower must
sign a written contract with the consultant. The homeowner has 5 business days to
The contract must state exactly what rescind, or cancel, the contract. A notice of
services are to be provided to the home‐ right to cancel must be given to the
owner, the total amount and terms of homeowner along with a copy of the
payment expected, the name and business contract.
Beware of Loan Modification Scams 2