A reader is stuck paying back a mortgage on a foreclosed home but may really be the victim of a scam.

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Question: I had a second mortgage on a home that was foreclosed in 2001. That debt ($30,000) was sold to a company that I have been paying $200 a month to since 2003. That was a verbal agreement via phone. In 2008, they sent me a contract to pay back $20,000 for 10 years. I had my signature notarized and mailed back to them. They obviously never received that signed contract and have asked me again to sign a contract to pay back another $20,000. According to the contract I signed in 2008, the debt should have been paid off in 2018. They are still ACH deducting a payment from my checking account. I have not missed a payment in 15 years. I calculated I have paid them approximately $35,000. I am now retired and living on Social Security and am struggling. How do I stop this madness? – Linda G. in Tennessee

 

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Denny Ceizyk from Lending Tree responds…

The fact that you made payments for five years based on a verbal agreement is extremely concerning to me. If the payment agreement was legitimate, the company should have required that you sign a document acknowledging the terms of repayment before ever accepting a payment.

The second thing that is of even greater concern is that they asked you to sign a new agreement a year after you indicate the balance should have been paid in full. Under no circumstance should you sign another contract until you seek legal help (more on that below).

Taking steps to stop fraudulent ACH withdrawals

While you research the legality of the first payment agreement, I recommend you immediately revoke authorization for ACH transfers from your account. The Consumer Financial Protection Bureau (CFPB) recommends contacting both the creditor and your bank to start the process (and offers helpful templates for written correspondence).

  1. Contact the company itself to “revoke authorization” of the automatic withdrawal, which means you won’t be letting your bank provide those withdrawals anymore. Calling should start the process immediately, but writing will provide a record of your request.
  2. Next, call and write your bank or credit union and tell their representatives that you want to revoke authorization of that automatic payment to the debt collector. If a withdrawal is coming up soon and you want to stop that payment from being made, you’ll need to visit your bank or credit union in person or contact them at least three business days before the withdrawal is scheduled. Your bank or credit union may need you to show them your written notice to the debt collector proving you notified the company that you will no longer be authorizing automatic payments.
  3. If all else fails, you can close the account the ACH withdrawals are being made from, and let the bank know that you believe they may be the result of a fraudulent distressed payment agreement that you are seeking legal help with.

How to get clarity from the mortgage collection agency

When you contact the company to stop automatic payments, also ask for confirmation that you actually owe additional money on the mortgage. The Fair Debt Collection Practices Act (FDCPA) includes mortgage debt collection issues. It requires that a debt collector provide written verification of the debt they are attempting to collect, so make sure to push for details.

Be sure to also ask for a written report of your account’s history detailing every payment you’ve made. I’m concerned that the payments made based on the verbal agreement may not have been credited to the balance or may not have been for the right amount. Unfortunately, verbal contracts for real estate transactions are not legally binding. However, if your debt turns out to be legitimate and you think the company acted in bad faith by offering a verbal agreement, you can file a complaint with the CFPB.

Based on your circumstances, I think it’s crucial you bring your copy of the notarized contract from 2008 and any other written communication you’ve received to a lawyer for review. The Legal Aid Society offers help with housing issues and may provide you with free counsel. Since Plainview is in Union County, the Oak Ridge office represents you. To get help, call 865-483-8454 or 800-483-8457 and set up an appointment to meet with a lawyer. Explain that you’re concerned you may have fallen victim to a mortgage scam.

What to do if the debt obligation is legitimate

If your debt was, in fact, sold to a valid mortgage collection agency after being charged-off by the lender, have your lawyer review the contract you signed that said your debt would be paid in full by 2018. Make sure interest payments or fees haven’t increased your overall balance — the contract should show the full amount owed.

If your repayment plan was the result of a court judgment against you, the mortgage collection agency is legally allowed (with some restrictions) to automatically withdraw funds from your bank account. However, according to the Federal Trade Commission (FTC), Social Security benefits can’t be garnished unless you are paying child support, alimony or federal debt such as income taxes or a federal student loan. Since your income comes from Social Security benefits, you may have an added protection from these automatic withdrawals.

If you struggle to afford your monthly payments, ask the company if they’d be willing to lower the amount. If you can’t manage repayment on top of other debt or financial hardships, you may want to consider bankruptcy. Though not ideal, filing should prevent creditors from collecting on debt.

Again, I really think you should seek legal help before you make any more payments to this company. Also, make sure to keep copies of all written correspondence with the company.

I hope this issue is resolved quickly.

Lending Tree are experts at mortgage refinance. Talk to them for your refi needs.

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About the Author

Denny Ceizyk

Denny Ceizyk

Denny Ceizyk is a staff writer at LendingTree and 25-year veteran of the mortgage industry. He has worked in all facets of home loans starting in loan processing and ultimately owning and operating a mortgage brokerage company for 18 years. Denny has written and presented to government housing, local media and national media about mortgage financial literacy. He graduated from the University of Arizona with a degree in Media Arts and Business, and recently relocated to New York City where he lives with his wife and daughter.

Published by Debt.com, LLC