Mortgage And Loan Modification Scams On The Rise….Homeowner Beware!
Foreclosure Fraud On The Rise.
Realtors, loan officers…everyone. Read this post immediately. There has been a dramatic spike in FORECLOSURE and LOAN MOD SCAMs.
Mortgage Loan Modification Scams: Typically what is happening is that troubled homeowners are paying $1000…$2000…$3000 UP FRONT and receiving no services. Whats worse, many of these LOAN MOD scammers are collecting the fees and never doing anything to try to help the homeowner. If you are doing loan mods the ethical and honest way you know that you NEVER charge upfront fees. If you are in one of the hand full of states that requires any sort of ‘license’ or ‘state approved process’ you must comply.
Mortgage Rescue Scams. This type of thing has gone of for years. Here is the typical scenario: Homeowner is late 90 days+ on their mortgage. They have equity. A mortgage rescue scammer offers to ‘save their mortgage. The scammer makes it so the homeowner signs the deed over. Next, the scammer has the seller pay THEM their mortgage payment. Additionally, the homeowner agrees to sign a lease on their former home (remember they signed over their deed). The homeowners is led to believe that the scammer will bring the mortgage current and then make the payments for the homeowners over an agreed period of time. Homeowner is told that they can ‘buy’ the house back from the scammer. What really happens is that the scammer never makes a payment. Keeps the lease payments…and then (when there is equity) throws the now renter out of the house. The house is sold and the scammer keeps the former owners equity. There are many forms of this scam but, thats the basic format.
Here is the news report:
The U.S. Treasury has announced a new effort to crack down on criminals who prey on people seeking help with their mortgage problems.
On Monday, Treasury Secretary Timothy Geithner reported that government agencies had recently identified dozens of suspicious companies that were running suspicious ads about mortgage foreclosure rescue services.
According to Geithner, the Treasury’s Financial Crimes Enforcement Network has already produced a number of recent leads that are helping law enforcement agencies stop foreclosure scams or further investigate suspicious companies.
Geithner also noted that the Obama administration’s Making Home Affordable program is an important part of its economic stimulus effort, which makes foreclosure fraud an even higher law enforcement priority.
“American homeowners desperately need the relief this program offers, but the very last thing they need is to be taken advantage of as they try to hold on to their homes,” said Geithner.
A report by ABC News said that the FBI is currently investigating about 2,100 mortgage fraud cases, a 400-percent increase from 2004.
The scams typically target homeowners with damaged credit scores who are willing to pay upfront fees to people who claim they can resolve their mortgage problems. Unfortunately, many of these people end up with worse consumer credit in the long run.
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Just FYI, in quite a few states it is illegal to collect money in advance for any services from homeowners that are in distress or in foreclosure. The NJ Attorney General has shut down MANY of these companies in NJ, and you really don’t even see ads for them anymore. This is a good thing!
Today I spoke with a Deputy Commissioner form the California Department of Real Estate whom shall remain nameless. He oversees the Mortgage Loan Activities Unit which monitors Brokers who have received ‘no objection’ letter for Advance Fee Agreements. He said the DRE and several other government enforcement agencies are going after ‘illegal’ loan modification companies and ‘approved brokers’ as well. He warned that any company or individual caught attempting to “go sideways” and circumvent the law as it relates to advance fees, trust accounting, advertising etc. will be put out of business and may go to jail depending on the severity of their violation(s). It’s not worth ruining your reputation and looking at possible jail time to make a few bucks. My advice for anyone looking to get into the business of loan modification: keep your nose clean and do not charge advance fees for your services. Treat it like a short-sale, purchase or refinance transaction and get paid when you’ve completed the work and secured a successful loan modification.
Thanks Ty…….fantastic comment. I couldnt agree more….
Our mod rules are simple:
1) NO upfront fees…ever. Even if you are in a state that has NO mod laws etc.
2) NEVER tell any homeowner to not make a payment.
3) If you are in a state that has any sort of laws, regs (California being the best example)..for Gods sake…follow the law. You are doing mods to be part of the solution NOT part of the problem.
4) NEVER promised the homeowners anything beyond your control. After you have taken their application if they dont qualify based on the standards…TELL THEM THE TRUTH.
5) If you come across anyone who is scamming homeowners….report them. Again, be part of the solution not part of the problem.
6) Once the mod has been approved and accepted by the seller….charge a fee that is realistic. Remember, these homeowners need your help. DONT become a scammer and try to overcharge at the end of the service.
7) Keep yourself educated. Never stop learning. If you don’t want to keep up with the mod industry then refer your mods to someone who will. We have a short list of Loan Mod companies who are following the letter of the law and are acting ethically. Its OK to refer your mods to someone else to process. You will be paid the ‘origination/ application’ commission…legally.
Anyone else have rules they want to suggest for us to add to our list?
Tim
The BIG SCAMMERS are the Banks…the ORIGINAL LOANS are a SCAM. Most of these
Modified Loans end right back on the Foreclosure List because it isn’t the SOLUTION
to the PROBLEM.
You have to have HIGH PAYING JOBS to pay for EXPENSIVE HOMES with HIGH
MONTHLY MORTGAGE PAYMENTS.
The Government needs to create more WORTHLESS, HIGH PAYING JOBS instead
of LAYING OFF PEOPLE and Handing the Banks more MONEY.
The BANKS should be GIVING AWAY HOUSES to OLD, RETIRED PEOPLE~!!
What software do the members here use
to simplify tracking and submitting the loan
Modification paperwork to the bank.
Now back to the topic, I can tell you of at
least 10 people I know who have been scammed
Even with the new law here in Florida. The
Scammers refuse to give refunds even when they
Are told they are breaking the new law. These people just
Disappear without a trace with the homeowners money.
I have to agree somewhat with Jay.
The big banks,Chase Home Finance in particular are the scammers. My son got behind on his payments. He applied for, and received a loan mod from Chase bank on Jan 2009. My son made a down payment of $1075 and two monthly payments of $910. His arrearage was placed at the back of the loan. he was charged 3K in fees and his 88K loan is now 94K. His mortgage is current under the terms of the mod. On The same day his mod was approved thay put his house into forclosure. Now get this. The bank says that his loan is current. The lawyers, Sampson and Ruftus, Cincinnati Ohio, that work for Chase bank say that the home is in forclosure and have not received a directive from Chase to stop the forclosure. The appraisers have been to his house and the Sheriff has listed the house in the newspaper. My son could end up on the street even though he has an approved loan mod from the bank.
Jay!!! I’m with you brother..
Right…..we hear the same things.
Thats why we want you to do mods ethically and legally.
DONT ever charge upfront….even if your state allows it.
Try to attend the call tomorrow!
Tim
thats an insane situation….tell your son to hire an attorney….an attorney can stop the foreclosure process…
or
maybe, its better to let the house be listed and sold via a short sale.
Mods are really only for those folks who has the desire to stay in the home…even if they have negative equity (upside down)
Sorry for your son either way.
Tim
Wow, Ed, you didn’t say how many months behind your son was in payments to Chase, or if he applied for and negotiated his loan modification himself … but I think that, perhaps, that huge amount of due now “down payment fee” could have been negotiated down to far less (or eliminated) by an HREU student negotiating on behalf of your son. Possibly they would have even asked for and received a 50% reduction to the ‘arrareage fee” added on to the back of your son’s loan (causing only a slight rise in principle balance).
However, if the approved, accepted, and currently being paid loan modification isn’t even being honored by Chase and their “collection” lawyer, that’s awful and Tim Harris is right about your son’s unfortunate immediate need this week to hire a reasonably priced real estate lawyer to demand that the loan modification be respected without requiring any additional lawyer or foreclosure filing fees be charged!
This is a hard position for a HREU Certified Loan Modification Specialist to be in though, because if I had be hired (without charging upfront fee) to negotiate a good loan modification with my client’s lender, and it was accepted by all parties, and closed then I would have immediately cashed the check for my hours of services on behalf of the client. My past client could, as in this case, find out after making 2 of the new monthly payments that their home was in foreclosure perhaps never to be removed from it. I wouldn’t be able to return their money, since I’d have Chase’s representative and my client’s signature of acceptance of new loan modification in my closed file. Requiring me to repay my fair “completion fee” would be illegal, even though if the client contacted me I’d have feel terrible for them and advised hiring a lawyer immediately to enforce the currently being paid loan modification contract/agreement.
I am on the sideline still as to how I want to handle the loan mod. If I go with an attorney from one of the suggested lists, the fee for the borrower will be around 3 K. That’s a lot for someone who doesn’t have anything in the first place.
As of right now I educate distressed owners before I list their property for a short sale. I have them sign something that states several questions including whether they understand that perhaps the lender would agree to a loan modification, do they know what a loan mod is and do they want to stay in the house.
I also understand from my own experience dealing with lenders in short sales that working with lenders is not easy and they have more than one option available to them. In most cases the lender has the knowledge while the borrower is at a negotiating disadvantage in that respect.
Margaret….process the mods yourself….its not that hard. Probably 30% of the process that a SS takes…
Linda,
What?????????? How did you turn a guy’s comments about his son’s situation, to let other people know what might happen to them, into a personal diatribe regarding your HREU way of doing things and why you get to keep money under the circumstances. If you want to share something with all of us just be straight
forward and tell us. Please read your own post, sounds like you work for HREU… way over done as far as delivering the information and it wasn’t even that relevant.
In NJ you have to be a licensed debt adjuster or an attorney to do loan modification.