That is the key message of a campaign launched in Massachusetts on Monday to alert homeowners to the proliferation of loan modification schemes nationwide. The campaign, backed by local, state, and federal agencies, urges owners not to pay any money in advance of a securing a refinancing deal and advises them to use a federally approved loan counselor for refinancing and to report suspected fraud to federal or state authorities.

“Loan modification scams are reaching epidemic proportions across the nation,” said Thomas J. Curry, a board member of NeighborWorks America, a Washington nonprofit spearheading the nationwide program. “Countless fraudulent companies are making a great deal of money by preying on the fears of worried homeowners.”

The effort comes as foreclosure activity mounts in Massachusetts. During the first four months of the year, 4,821 homeowners lost their properties to lenders, a 36.6 percent increase from the same time a year ago, according to Warren Group, a Boston company that tracks local real estate. Another 9,008 homeowners went into foreclosure during that time.

Grace Ross, a founder of the nonprofit Massachusetts Alliance Against Predatory Lending, praised the new campaign as a much-needed effort to keep financial predators from taking advantage of desperate homeowners. Only a small percentage of people seeking relief from lenders are getting it, she said, and many are not aware of their legal rights.

“The crisis continues,” Ross said of foreclosures in the state.

Barbara Anthony, undersecretary of the state Office of Consumer Affairs and Business Regulation, said officials are working on many fronts to help homeowners, including by hosting workshops to bring lenders and mortgage holders together.

“A seemingly quick fix to a foreclosure can be attractive to families in the midst of a crisis, but homeowners need to be aware of the potential to be scammed,” said Anthony. “The quick-and-easy promises of unscrupulous entities offer false hope.”

Mortgage loan schemes in Massachusetts typically fall into one of three categories, according to the state attorney general’s office.

They include attempts to dupe homeowners into transferring ownership of their properties to someone else; programs that charge hefty fees but provide little or no help; and for-fee bankruptcy filings that are intended to help an owner keep their house, but are rejected by the courts because of improper paperwork.

Homeowners are urged to avoid anyone who guarantees a way to avoid foreclosure and to make sure a counseling agency is approved by the US Department of Housing and Urban Development.

The campaign will feature fliers, public service announcements, and placards on buses. For more information about how to avoid foreclosure and report suspected scams, visit www.loanscamalert.org or call 1-888-995-4673

The seven-member court said Monday it will take on the so-called Ibanez case through a process that allows it to bypass the Appeals Court. The SJC will review a 2009 ruling by Massachusetts Land Court Justice Keith C. Long that found two foreclosures in Springfield were invalid because ownership of the mortgages was not clear at the time the properties were sold. Until Long’s decision, it was not unusual for the final paperwork on a foreclosure sale to be filed after the deal was completed.

The ruling — which came as a shock to many who deal with the sale of distressed homes — set off a chain reaction in the real estate industry. Many lenders delayed closing deals out of fear that they could be voided, title companies began balking at insuring such properties, and people who already owned foreclosures worried they might face legal complications.

“This is an important enough issue, not just in the state but nationally, that it made sense for the Supreme Judicial Court to start weighing in,’’ said Cambridge lawyer Paul Collier, who represented one of the homeowners in the Springfield case. “A definitive answer is important for borrowers, lenders, and people facing foreclosure.’’

The case addresses issues created during the housing boom as millions of mortgages nationwide were bundled into bonds and sold to investors, often resulting in a twisted paper trail that obscured ownership.

In the Springfield case, the lenders — US Bank National Association and Wells Fargo Bank — did not record that they owned the mortgages until 14 months after the properties were sold, court documents show.

Lawrence Scofield, a Woburn law yer who represented the lenders in two consolidated cases ruled on by Long, said he hopes the state’s highest court at least will clarify that the 2009 Land Court decision is not retroactive, meaning that sales finalized before then are not in question.

“It needs to be toned down. It has cast a cloud on titles that have gone through foreclosure over the past 20 years,’’ said Scofield. “All those foreclosures are done, and there are new families in those homes. What good does it do to cause their titles to be questionable now?’’

The court is expected to rule within a year, officials said.

Cutting loan balances is perhaps the best way to keep people in their homes, especially those with properties whose value has fallen well below the mortgage amount. More broadly, B of A is the nation’s biggest financial institution and by far the largest issuer of mortgages. Its move could spur other lenders to offer similar foreclosure relief.

“It’s a step in the right direction,” Roberto Quercia, director of the Center for Community Capital at the University of North Carolina in Chapel Hill, told me.

B of A is implementing the program under an agreement with Massachusetts officials, although it will be offered nationwide. Another motive — consumer advocates have filed a class-action lawsuit against the company in Massachusetts district court for allegedly breaching its agreement to modify people’s mortgage under the federal Home Affordable Modification Program. B of A faces a similar suit in Washington. Massachusetts residents also have filed complaints against J.P. Morgan Chase (JPM), OneWest Bank and Wells Fargo (WFC) accusing the companies of violating HAMP guidelines.

B of A’s principal-reduction program is aimed at both subprime and prime borrowers. For qualified homeowners, the bank will look first to cut up to 30 percent of the mortgage balance; only then it will consider other options to reduce loan payments, such as cutting the interest rate.

Initially, however, the program will cover only two kinds of loans — pay-option and hybrid ARMs. That’s a concern, Quercia said, explaining that to really draw a line against foreclosures B of A needs to expand the initiative to include other types of mortgages. He also noted that the program seeks to rehabilitate underwater loans over a period of five years. That may not do much to help people recover their home equity in the short-term, he said, and people might still be tempted to walk away if they are too far underwater.

For now, B of A expects to be able to offer principal reductions to only 45,000 customers nationwide. That’s a significant number, but not so much relative to the huge number of its customers who face foreclosure. According to the latest federal data, fewer than 21,000 B of A borrowers out of an eligible pool of nearly 1.1 million have had their mortgages permanently modified under HAMP.

As I explored in my recent piece about OneWest (aka IndyMac), such desultory figures aren’t solely B of A’s fault. HAMP itself is a bust. In a new report, TARP Special Inspector General Neil Barofsky characterized the $75 billion modification program as ineffectual and said it has fallen far short of expectations. He also accused the U.S. Treasury of inflating the number of homeowners who’ve gotten help by focusing on the number of trial, rather than permanent, loan modifications. Says the report:

“Absent a thorough review of HAMP and its goals, the program risks helping few, and for the rest, merely spreading out the foreclosure crisis over the course of several years, at significant taxpayer expense and even at the expense of those borrowers who continued to struggle to make modified, but still unaffordable, mortgage payments for months more before succumbing to foreclosure anyway.”

HAMP is riddled with problems, according to Barofsky. These include changing document requirements for borrowers; confusion over how participating lenders calculate whether a mortgage qualifies for relief; inadequate verification of homeowners’ income; and poor training for loan servicers in HAMP.

To this I would add an even more important factor: Banks and loan servicers have financial incentives to foreclose on homes rather than to alter mortgages. Concluded Diane Thompson, an attorney with the NCLC, in a recent report: “The compensation and constraints imposed on and chosen by servicers generally lead servicers to prefer refinancing, foreclosures and short-term repayment plans to modifcations.”

What’s the solution? B of A’s move will help, as will patching up HAMP by, for instance, clarifying who qualifies for the program. But the best option would be for the Obama administration and Congress to revisit legislation empowering bankruptcy courts to “cram down” mortgages.

That would hurt bank earnings. But companies like B of A are strong enough to take the pain, with analysts predicting a major rebound for the industry. Meanwhile, the foreclosure epidemic continues to rage. Time for stronger medicine.

But there is a flurry of signs, some national, and one local, that we just might be finally reaching a turning point.

On the macro level, the number of homeowners falling behind on their mortgages actually fell in the fourth quarter, the Mortgage Bankers Association reported Friday.

Mortgages either 30 or 60 days past due fell in the fourth quarter compared to both the third quarter of 2009 and the last three months of 2008 as well.

Meanwhile, a few government officials appear to be finally getting the idea the time is past for fancy sounding initiatives with big numbers that, when push comes to shove, just don’t work.

The Obama Administration is sending $1.5 billion to five states hardest hit by the foreclosure crisis, namely Nevada, California, Florida, Arizona and Michigan. The money will be used to do everything from bail out underwater homeowners to help the jobless pay their mortgages.

That has got to be more effective than all those silly loan modifications.

And locally, the number of foreclosed homes sitting empty in neighborhoods across Boston is also starting to fall markedly.At one point, there were nearly 1,200 foreclosure specials out there in neighborhoods like Dorchester, Roxbury, East Boston and Mattapan.

That number has since plunged to 778, Evelyn Friedman, head of the Department of Neighborhood Development, tells me.

City Hall has either purchased or put under agreement 120 foreclosed homes, which it plans to resell to local nonprofit housing organizations, developers and individual homeowners.

“I would hope in the next two or three years we would be finished with the foreclosure problem here in Boston,” Friedman said.

Bold words yes, but backed up with some real action.

A Newton, Massachusetts mother is hoping the kindness of friends and strangers can help her keep her family home.

When Elinor Beatrice met her husband Jeff 20 years ago, they each had children from previous marriages, but they would spend the coming years expanding their family even more.

They raised 11 kids in the same house Jeff grew up in, a rambling Victorian on a leafy street in Newton.

“My husband was the heart of the home. It’s very quiet without him now,” she said.

Not even two weeks ago, Jeff Beatrice had a heartache in that same home. He died in Elinor’s arms. He was 49 years old.

“It’s hard to believe he’s gone. Every day gets a little harder,” Elinor said.

Harder still because Jeff was the breadwinner, a struggling self employed CPA whose financial woes spiraled after a bad real estate investment. The Beatrice’s had trouble making ends meet and after a few years, the mortgage got away from them.

“We’ve tried food stamps but, you know, we’ve always made just a little too much to qualify for any real assistance,” Elinor said.

Eventually, they were foreclosed upon and just days before Jeff died, the mortgage company let them know it would be auctioning off their house. The family did not get swindled or taken advantage of. They fell behind and now Elinor must figure things out, with seven kids still living at home — the youngest just five.

“It’s just an overwhelming thought. And where do you go with seven kids?” Elinor said.
Thankfully, she is not answering that question alone. For the past two decades, Jeff Beatrice has coached every youth sports team imaginable — from Newton Little League to girls basketball.

“You never knew who his kids were,” family friend Jim Byrne said. “It was all the same to Jeff.”

“Any kid that was in trouble, their family was struggling, they weren’t getting enough attention at home, those kids gravitated toward the Beatrice’s house,” family friend Diane Wilcox said.

When word got out that the Beatrice family needed help, hundreds of people stepped up to the plate. A memorial fund has been established, the high school hockey team gave up money from their yard sale, strangers have dropped off everything from gift cards to groceries.

“Even my eleven year old’s friend gave me $6 from her piggy bank, which is all she had, but she was willing to give to us,” Elinor said.

The house was supposed to be auctioned off November 5th, but strangers and politicians have gotten the family a 60 day extension. Sixty days to keep a house a home.

That’s the good news.

But let’s not get smug here.

The latest numbers from RealtyTrac are out, and they don’t look good for Massachusetts.

Foreclosure activity, including initial notices starting the process, auctions and bank repossessions, jumped more than 17 percent over the past three months compared to the spring. And the third quarter numbers, when compared to the same period in 2008, look downright hideous – a 34 percent leap.

Many of the overleveraged homeowners who took out all those goofy subprime loans during the bubble years have been foreclosed on already.

The increase in filings is now being driven by an economy that appears to be on the mend, but is still shedding jobs at a worrisome rate.

Nationally, foreclosure activity skyrocketed 23 percent in the third quarter over the same period in 2008, RealtyTrac reports.

One out of every 136 household across the country got a foreclosure notice or other filing during the quarter – the most since RealtyTrac began tracking these trends in 2005.

Where does it all end?

One answer of course is when the job market finally stabilizes and the unemployment rate finally tops off and starts to come down.

On that score, check out the “Adversity Index’’ put out by Moody’s Economy.com and msnbc.com.

One of five metro areas in the country has emerged from the recession, according to the index’s latest report.

The Cambridge/Metro is one of those lucky few. I live in Natick, so I am ready to really celebrate here!

By contrast, the Boston/Quincy area is still stuck in the downturn.

Such silliness aside, I think we’ll all know when the job market is starting to come back.

And when it does, look for the beginning of the end of the foreclosure madness – at least until the next bubble bursts.

Justice Keith C. Long affirmed his own March decision that invalidated foreclosure proceedings involving two Springfield homes because the lenders did not hold clear titles to the properties at the time of sale. In today’s reconsideration of that ruling, Long described a convoluted process in which ownership of the mortgages changed multiple times without being properly recorded. He said the problems lenders now face are “entirely of their own making,” and if they seek a change in law they should look toward the Legislature.

“The issues in this case are not merely problems with paperwork or a matter of dotting i’s and crossing t’s,” Long said in a 27-page decision. “Instead, they lie at the heart of the protections given to homeowners and borrowers by the Massachusetts Legislature.”

The decision comes seven months after Long’s initial ruling, which came as a shock to many who deal with distressed properties. Lenders believed they could complete foreclosure transactions and later produce formal proof they held the mortgages. Since March, some lenders have stopped selling foreclosed properties out of fear the sales later could be voided, and title companies have refused to insure them. The logjam has impaired efforts by communities and nonprofits to buy and rehabilitate foreclosed homes in some of the state’s hardest hit areas. It has also made it difficult for individuals to buy foreclosed homes.a

WBUR has a great report on the Massachusetts Foreclosure and Subprime Mortgage crisis.

BOSTON — Where were Massachusetts banking regulators as the subprime mortgage crisis exploded all around them? An investigation by the New England Center for Investigative Reporting found Massachusetts lags far behind other New England states in the number of serious disciplinary actions against mortgage brokers.

Jaime Alvarez has the face of a trusting man. The 57-year-old and father of two young children emigrated from Colombia 37 years ago. His warm smile is followed by a gentle handshake.

On a summer afternoon in Brighton, he is taking his kids — a boy and a girl — to a nearby park. He is out of work because of a back injury he suffered while doing some repair work on his home. Several steps up from the sidewalk where we’re standing is that Brighton home — one Alvarez can barely afford.

“At the beginning we had to figure out how to come up with the money for the mortgage. We didn’t know what to do. So we were living in one room with my kids and my wife and I–” Alvarez breaks down into tears.

Despite Alvarez’s family income of $38,000 a year, he obtained $580,000 worth of subprime loans that add up to yearly mortgage payment of almost $52,000 a year.

“We are both from the same country and he was treating me like a member of his family,” Alvarez says of Mauricio Osorno, the owner of Your Home Mortgage in Chelsea. “I trust him, right from the beginning. I trust him completely.”

Alvarez says Osorno never explained the terms of the mortgages. Alvarez says he was forced to take in boarders to meet his monthly payment.

Allegations Of Unfair Practices In Mortgage Lending Arise

The mortgage broker Alvarez used — Your Home Mortgage — is now the subject of a Greater Boston Legal Services lawsuit alleging unfair and deceptive practices and discrimination. The company was also the subject of two complaints sent to the state Division of Banks that regulates mortgage brokers and lenders.

“I think there was a lot more that probably could have been done at the time,” says Legal Services attorney Nadine Cohen.

Cohen is specifically referring to what happened when a nonprofit foreclosure prevention specialist filed two complaints with the state division of banks about Your Home Mortgage. In one letter on behalf of Alvarez, she wrote to the division saying that Alvarez’s mortgages appear to be based on “no income verification.”

The Division of Banks wrote back saying it did not see anything wrong with what Your Home Mortgage had done.

“I felt like a mountain came over me,” Alvarez says. “I was hoping that I was going to get some help, but it never happened.”

Mauricio Osorno, who, with his brother Diego, runs Your Home Mortgage, would not talk about the lawsuit or complaints against their company, except to say they deny the allegations.

The Osornos also have a companion real estate company called Su Casa y Más. As part of our investigation, we found that nearly 50 percent of the residential sales Su Casa has been involved in — representing the buyer and seller — since 2005 ended up in some stage of foreclosure. The average foreclosure rate for residential properties in Massachusetts is about 9 percent.

Where Were The Regulators?

Over the past two and a half years, as the predatory lending crisis was exploding, the Massachusetts Division of Banks issued 43 serious disciplinary actions — suspensions or revocations or forced license surrenders — against mortgage brokers and lenders. That is slightly less than three percent of the companies it licenses, and it puts Massachusetts dead last compared to every other state in New England and below North Carolina, which has a similar number of brokers.

“Anytime you hear that Massachusets is well below national averages or well below where other states are in terms of enforcement actions or cracking down on behavior that we want to crack down on, it’s a concern,” says Tom Callahan, director of the Massachusetts Alliance for Affordable Housing.

“I think we have an excellent record of taking action when we’ve found a problem and in keeping people out of the business so they won’t perpetrate this fraud.” says Division of Banks Chief Operating Officer David Cotney.

Cotney argues the division’s 210 informal actions, the details of which are not made public, have prevented more serious mortgage abuses. The division also sees itself as leading the way in policy initiatives to reform the mortgage industry.

More Investigators, But Less Disciplinary Action

Our investigation found that Massachusetts has more than double the number of investigators compared to all of the other states we surveyed, but it might not be enough.

A 2007 state audit cited a need for more aggressive enforcement by the state division of banks. The audit said the agency’s “capacity to perform examinations (of mortgage brokers) has not kept pace with the increase in the number of mortgage lenders and brokers under its authority.”

“Maybe the Division of Banks wasn’t nimble enough to switch and pull resources from the banking, the credit union world and say ‘our major concern has got to be the mortgage companies,” Callahan says.

In response to the state audit, the Divison of Banks successfully lobbied the legislature for funding to hire more examiners. But despite that extra manpower, the number of examinations of mortgage brokers and lenders dropped by 74 between 2006 and 2008. not until 2008 did the agency set up a special unit to investigate mortgage fraud.

In the meantime, the number of foreclosures in Massachusetts more than doubled.

While Massachusetts — compared to the other states we looked at — ranks last in the number of serious enforcement actions, it ranks second in its foreclosure rate.

So why didn’t the division of banks take action when it received complaints about your home mortgage, the company that gave Jaime Alvarez his subprime loans?

“I’m not familiar with this particular issue but what I can tell you is we don’t just have a policy of saying these are bad acts or practices, we actually do have a track record.” says David Cotney.

That was Cotney’s answer to practically every one of our questions: the Division of Banks has a track record that it is proud of.

When we asked about the depth, severity and impact of the subprime crisis in Massachusetts, Cotney — the chief operating officer at the Division of Banks — did not have an answer.

“What troubles me most is that poor, unsophisticated, often non-English speaking people put their hard earned money into buying a house and really tried their best to make their payment, but they were doomed from the beginning,” says Cohen, the Legal Services attorney.

The experts we interviewed for this story say those families are not the only victims — all of us are paying the price for a lack of aggressive enforcement of the mortgage industry.

In the midst of the worst mortgage crisis in recent history, at a time when foreclosures are still on the rise, the state Division of Banks’ record is this: only 43 serious disciplinary actions over two and a half years, the worst record in New England.

Jamie Lutz, Lyle Moran, Christie, Molly Connors, Nina Cromeyer, Ben Ezickson, Sydney Lupkin, Dan Rosinski, Lauren Winowich and Maggie Mulvihill, co-director of the New England Center for Investigative Reporting, contributed to this report.

As part of their second-year curriculum, the students will participate in field studies, working with the HPF team to design and implement new management strategies; marketing, operations and social media methods; and more.

The idea for the partnership began with a conversation between Lindsay Jurist-Rosner, a recent Harvard Business School graduate, and Brian McGinnis, a former member of Lehman Brothers’ corporate strategy team, about what MBA students could do to help Americans affected by today’s financial crisis. With the help of HBS professor and consumer finance expert Peter Tufano, the two narrowed their scope to focus on mortgages and foreclosures and were introduced to the team at the Homeownership Preservation Foundation.

“As we read in the newspaper every day, the threat of foreclosure continues to place many American families in jeopardy,” stated Colleen Hernandez, President of the Homeownership Preservation Foundation. “HPF is committed to doing our part to stem this tide and we are thrilled to support the development of Harvard Business School’s graduate students as they contribute their practiced business expertise to support our mission of preserving homeownership.”

“These graduate students wanted to find a way to help us achieve our mission – and we knew that they would bring energy, knowledge, and ideas that would increase our capacity to serve homeowners,” continued Hernandez. “It says a lot about the caliber of these students that they are willing to put their education to work in this way.”

Jurist-Rosner and McGinnis enlisted HBS classmates who shared their desire to give back. Fred Smith, Jurist-Rosner’s classmate, as well as two rising second year students, Damali Brown and Joshua Awad, joined the team. Members of the HBS team traveled to HPF headquarters in Minneapolis in May to meet with senior members of the organization and to finalize the details of the field study.