When Supervisor David Campos speaks to the roughly 800 perspective homeowners at the home ownership fair Saturday at St. Mary’s Cathedral, the message will be that San Francisco now has legislation that will protect them in case of fraud.

A law that passed in August regulates mortgage modification consultants.foreclosed

A mortgage modification is a process where the lender and the borrower agree to modify the term of the loan.

The law requires those who provide these services to have a written contract in the language of the borrower, make clear that non-profits give these services for free, prohibit collecting fees until the the loan modification is complete and allow the borrower to seek criminal charges and reparations from the consultant.

Campos became aware of mortgage fraud when he was on the police commission and heard victims talk about mortgage fraud

“Corrupt mortgage modification consultants are preying on desperate homeowners by falsely promising to help them modify the terms of their mortgages,” Campos said. “We are working to avoid more San Francisco residents from becoming victims of these scams.”

The program manager at the Mission Economic Development Agency, Josie Ramirez, said this kind of mortgage fraud is an issue that disproportionately hurts minorities.

Ramirez said that so far this year she has seen at least 50 cases, but was unable to help all of them because they were too far into the foreclosure process.

Jorge Elias Carcamo of Gold Keys Realty and Investments who has worked in the Mission for 20 years said the foreclosure crisis has made mortgage fraud much more common.

“This problem is so big that many people take advantage of it,” Carcamo said.

As of Friday there have been 341 foreclosures in San Francisco according to Foreclosures.com, a website dedicated to foreclosure listings.

Carcamo, who does mortgage modifications for free, said that not everyone qualifies. Of his clients only about 40 percent qualify because applicants need to have the ability to potentially pay the modified mortgage.

“I have seen people who go from consultant to consultant until they find someone that will say yes, and they take their money,” he said.

This is what happened to Excelsior resident Vherny Rustrian, 31, and his fiancée.

After Rustrian was laid off from his job as officer manager for a law firm last year, he and his fiancée went from making $8,000 a month to the $4,000 a month his fiancee earns as a school counselor.

Their  mortgage payment was $4,200 and they soon fell behind.

Unable to find a full-time job, Rustrian, a father of an 8-year-old and 5-year-old,  turned to a loan-modifying consultant in Fremont after seeing an advertisement on television.

“They promised us the world,” Rustrian said.  In return, he gave the consultant $3,600.

Rustrian said he received a three-day notice from the bank in May to leave the house. He has filed a complain with the city of Fremont and has a court date on Tuesday to try to keep his home of five years.

“Everyone is telling us to expect the worst,” he said. “I don’t want this to happen to anyone else.”

Rustrian said he has tried to stay positive, but what is worst is that it is affecting his children.

“After one of my kids saw the movie “UP,” he said, ‘Daddy let’s just tie a bunch of balloons in the chimney and fly away,’” he said in reference to the Disney movie about a man who does the same thing.

By the time they went to seek help from MEDA, a certified Housing and Urban Development agency, it was too late, Ramirez said.

Rustrian’s story is common, Ramirez said.

“I hope this legislation gives these predators a second thought,” she said.

Ramirez added that most lenders are willing to work with the borrower if they are victims of fraud.

“I would like to say it is out of genuine concern, but it is in their best interest in these cases what they owe in the loan is more than the house is worth,” she said.

Others don’t have the same luck Ramirez added, “If there is equity in the property, chances are [the lenders] are going to go with the foreclosure sale.”

If more people come to seek these free services from MEDA, Ramirez said, she doesn’t know if they will be able to help them because they are at full capacity.

“I would like to see the private lenders contribute more,” she said. “We do a lot of work for them already.”

Ramirez said future and present home owners could learn much by attending the housing fair today.

2009 San Francisco Homeownership Fair: Discover Your Options! Make the Right Choice! will take place on Saturday, October 10, 2009 from 10am to 3pm at St. Mary’s Cathedral, 1111 Gough Street San Francisco, CA.