As we all know, the mortgage scam artists constantly invent ways to attract paying customers. Here is a new one to avoid.

Several laws protect homeowners facing foreclosure by requiring lenders and loan servicers to give the homeowner a “single point of contact” within their organizations. This protection is crucial to prevent harmful lender practices such as dual tracking and misplaced modification applications.

We have now learned that profit-motivated third parties are contacting homeowners and leading them to believe they are the point of contact for the lenders and servicers who hold their mortgages. They are asking for private information from the homeowners, and may ultimately ask for fees. As a minimum, this scam activity can confuse homeowners and lead them to waste time that should be spent contacting legitimate representatives.
Homeowners should never deal with someone directly calling who is claiming to be a point of contact.

A legitimate point of contact representative should be identified in an official letter from the lender or servicer, with appropriate contact details included.

This type of scam is another good reason to contact a HUD-approved counseling agency. That agency can communicate with the lender or servicer to verify the point of contact representative and to submit the homeowner’s personal information safely and confidentially. A homeowner who is contacted by one of these scam artists should report the contact to his or her counseling agency, a non-profit legal services agency, or the local district attorney.

The Mortgage Forgiveness Debt Relief Act has been allowed to expire.  Before this law was passed in 2007, a homeowner who had a portion of his or her mortgage written off by a lender was considered to have received a taxable benefit equal to the amount of debt forgiven.   This rule applied to short sales, some types of modifications, and other forms of foreclosure work out options where a portion of the mortgage debt was waived.  As a result, before this Act, a homeowner could lose his or her home and still pay taxes on the amount of the home mortgage that was unpaid.  The Mortgage Forgiveness Debt Relief Act waived the taxable status of the event, which has been an important incentive to utilize foreclosure prevention options.

The Act had been routinely extended from 2007 until the end of 2013, but has now been allowed to expire.  There are bills pending in congress to re-authorize the Act, and there is another IRS rule for “insolvency” that could protect some of the same transactions.  However, every homeowner facing foreclosure should seek advice from a tax professional to address the implications of the expiration of the Act.  Many members of the real estate and mortgage industry are not aware of these implications.

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For a different point of view, see the discussion here, 

Here is a summary published by the California Reinvestment Coalition.

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