Laws You Should Know About, Three: Don't get ripped off when modifying your mortgage.

Amidst all the hoopla over mortgages and foreclosures this year, one law got passed by the State of Wisconsin that I heard no fanfare about, and yet it's a law that affects virtually every person who has fallen behind on their mortgage or is in foreclosure.

Wisconsin, effective March 6, 2009, made it illegal for foreclosure rescue scams companies to charge you upfront for work they plan to do.

Section 846.45 regulates "foreclosure consultants," who are any person...


...who, directly or indirectly, makes a solicitation, representation, or offer to a foreclosed homeowner to perform for compensation, or who for compensation performs, any service that the person in any manner represents will in any manner do any of the following: a. Stop or postpone the foreclosure sale. b. Obtain any forbearance from a beneficiary or mortgagee. c. Obtain a waiver of an acceleration clause contained in a promissory note or contract secured by a mortgage on the residence in foreclosure or contained in the mortgage. d. Assist the foreclosed homeowner to obtain a loan or advance of funds. e. Avoid or ameliorate the impairment of the foreclosed homeowner's credit resulting from the recording of a lis pendens or the conduct of a foreclosure sale. f. Save the residence in foreclosure from foreclosure.

The law specifically exempts some people who might do those things in their ordinary line of work -- such as lawyers.

Foreclosure consultants are required, under the law, to provide you not only with a right to rescind any contract you might sign with them; and they are forbidden to take any money until they do the work. As the law says:

It is a violation of this section for a foreclosure consultant to do any of the following:... Claim, demand, charge, collect, or receive any compensation until after the foreclosure consultant has fully performed each and every service the foreclosure consultant contracted to perform or represented that he or she would perform.

Violations of the law can allow a customer to sue for their money back or $200, whichever is greater ... plus attorney's fees. And based on what I've seen in the past few months, everybody is violating this law.