Good News from Bernanke
for Distressed Homeowners?
“Watch out for hidden landmines,”
warns leading consumer finance expert.

Federal Reserve chairman Ben Bernanke, speaking before a group of bankers in Florida Tuesday, called on the mortgage industry to “expand refinancing opportunities and efforts to facilitate and increase the pace of loan workouts.”

Is this good news for homeowners facing foreclosure? “Maybe,” says consumer finance expert and investigative reporter Benjamin Dover, whose aggressive strategy to help homeowners has been validated by Bernanke’s remarks.

"Principal reductions that restore some equity for the homeowner may be a relatively more effective means of avoiding delinquency and foreclosure,” said Bernanke at the Independent Community Bankers of America annual convention. “With low or negative equity in their home, a stressed borrower has less ability — because there is no home equity to tap — and less financial incentive to try to remain in the home.”

The Fed Chief’s call for principal reductions opens the door for the only strategy that will work, says Dover. “But it’s only a first step,” he says. “Homeowners must educate themselves about the many hidden dangers lurking behind these restructuring ‘opportunities.’”

Avoiding the Same Mistake

Desperate homeowners facing foreclosure are vulnerable, says Dover, and vulnerable people make bad decisions. “If you’re about to lose your home, the last thing you want to do is make the same mistake twice and sign another agreement with a lender that won’t be in your best interest.”

Any homeowner considering a bailout offer should ask themselves these two questions, says Dover:

1.  Who will you deal with to re-structure your loan? If you are dealing with an employee of the mortgage company or a third-party “counselor,” beware. These people work for the mortgage company and they are paid to protect the lender’s interests — not yours!

“Look at mortgage-related negotiations with the same level of caution that you would if you were pursuing a claim with an insurance company,” says Dover.

“An insurance claim adjuster has one mission: to pay the least amount of money for claims. Many adjusters refer to themselves as ‘loss containment specialists,’ because their job is to pay as little as possible to their policyholders. You are up against the same mindset when you try to restructure your mortgage.”

2.  How large a principal reduction are you entitled to? You’ll never know how much principal could be forgiven if you depend on your lender to look out for your best interests!

“If your mortgage ‘counselor’ tells you they are prepared to forgive $25,000 in principal — but you should have received a $50,000 reduction — you would never know that you just left another $25,000 on the table,” says Dover.

“You must do your homework to find out if your rights have been violated, and you have to be willing to play hardball.”

Educating Predatory Lending Victims

Dover’s website, NowWhatDoYouDo.com helps distressed homeowners understand their options. “First, we help homeowners recognize if they are a victim of predatory lending,” says Dover, “which is a crucial step towards receiving maximum financial relief. The sooner a homeowner understands that the law gives them incredible leverage against their mortgage company, the sooner they relax.”

“There’s a huge hole in Mr. Bernanke’s comments,” says Dover. “He has yet to utter the two words that strike fear into the hearts of the mortgage and banking industries, as well as Wall Street investment bankers, appraisers and everyone involved in the original home buying process.” Those two words? “Predatory Lending.”

Homeowners from a wide range of socio-economic backgrounds became unwitting victims of predatory lending during the mortgage boom, says Dover.

“It’s not just minorities and females. ‘Middle-aged white guys’ are also victims of the reckless lending practices that were routine for some of the mortgage industry’s biggest lenders.

“Millions of homeowners who signed the line for non-fixed rate mortgages since 1999 have had their federally-protected rights violated. This means that homeowners will leave billions of dollars of additional damages on the table — unless they know who to trust.”

Know Your Rights or Pay the Price

Thousands of homeowners may have already limited their recovery options, says Dover. “Many of the homeowners, who have bitten on ‘deals’ offered through 'HopeNow’ or ‘Project Lifeline,’ have signed themselves into further heartache. Some of these ‘deals’ were nothing more than forbearance agreements that only delay the inevitable. They’re in a loan they can’t repay, regardless of the interest rate…period!”

And it gets worse, says Dover. “Reports are now surfacing that many homeowners who agreed to forbearance repayment plans may have really hurt themselves. Apparently, some of these agreements were loaded with incorrect figures or packed with inflated and usurious fees that are inappropriate and illegal. Throw in the probability that many of these forbearance agreements may limit the homeowners’ legal recourse, and it’s a noose — not a lifeline — for homeowners who had a legitimate case,” warns Dover.

Dover is used to taking heat for empowering consumers with knowledge about their rights. “I upset the credit card and debt collection industries in the 1990s with my tell-all books about the Fair Debt Collection Practices Act. I was threatened and accused of helping consumers avoid paying their debts…but it was the same message I’m repeating now: Unless you know your rights and exercise those rights, the system will swallow you alive.”

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