Feds: Loan modification fraud on the rise

Bernice and Franklin Daniels say a company that

Bernice and Franklin Daniels say a company that promised to modify the couple’s mortgage on their Deer Park home charged them $2,500 and let it fall into foreclosure. (Oct. 11, 2012) (Credit: Daniel Brennan)

With complaints about mortgage "rescue" scams on the rise, Long Island homeowners need to watch out for fraudsters, federal and state officials warned Thursday.

"Scammers are alive and well and want your house, your money, or both," said Mirza Orriols, deputy regional administrator for the federal Department of Housing and Urban Development. She spoke at a news conference at Long Island Housing Services, a not-for-profit agency in Bohemia.

Distressed homeowners should seek HUD-approved housing counselors, and they should never pay in advance for help with loan modifications, the federal agency said.

Across New York, the number of complaints about mortgage modification fraud rose from 444 in 2010 to 626 in 2011, a 41 percent increase, according to the Lawyers' Committee for Civil Rights Under Law, which tracks the complaints. There have been 352 complaints from January through September in New York, with reported losses of $987,147, the group reported.

Bernice Daniels said at the news conference Thursday that she and her husband, Franklin, were impressed at first by the apparent professionalism of a company that promised to help modify the mortgage on their Deer Park home. But instead of helping, the company collected a $2,500 fee and let their home fall into foreclosure, she said. Without help from an attorney with Long Island Housing Services, Daniels said Thursday, "I probably would have been homeless right now."

A family in Commack might not be so fortunate.

Nicole Garofalo said in an interview Thursday that her mother, Gail, contacted Bethpage-based Empire Property Solutions in 2007 seeking a mortgage refinance. Her mother is disabled and suffers from chronic pain, and she was hoping to remodel the house, sell it and move to Arizona or Florida, Nicole said.

However, her mother unwittingly signed over the home's deed, and Empire drained its equity, she said Thursday.

The attorney general's office said Gail Garofalo was among the homeowners allegedly defrauded by Empire. The company and its two owners committed a "foreclosure rescue scam," according to a lawsuit by the attorney general filed in state court in Nassau County. One of the company's two owners faces federal criminal charges, and the other one has died, according to court records.

Having lost ownership of their home, the family must move out by next month, but they have nowhere to go, Nicole Garofalo said at the news conference Thursday.

The home's mortgage lenders have offered the Garofalos $20,000 to move out, but that won't go far once the family pays its debts, she said.

Empire "took advantage of the desperation and vulnerability of my mother," Nicole said, fighting back tears. "We lost our home."

Attorneys for Empire's owners could not be reached Thursday.

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