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California Mortgage Modification Fraud on the Rise

Protect yourself ... If It sounds too good to be true, it probably Is.

Underwater homeowners buoyed by the recent announcement of the National Mortgage Settlement are encouraged to be vigilant against loan modification predators.

An urgent letter dated July 8 from California Association of Realtors president LeFrancis Arnold emphasized the gravity of getting consumers educated about these possible scams.

Mortgage fraud reports have increased nationwide from more than 6,900 in 2003 to more than 93,500 in 2011, according to the Federal Bureau of Investigation.  And the nonprofit Homeownership Preservation Foundation reported the number of mortgage foreclosure scams has shot up 60 percent so far in 2012.

The predators usually look up the county's Notice of Default list, which is public information, to contact the unsuspected homeowners. It is expected these scammers will step up their efforts with the new settlement as distressed homeowners hanging onto this new ray of hope.

As incomprehensive as it is to learn of the greedy businesses/individuals taking advantage of desperate homeowners who are on the brink of losing their homes, I have, unfortunately, personally witnessed this.

The first time I heard of such scam was when the first wave of short sales/foreclosures hit six years ago. A buyer of my listing contacted me for advice. By that time, he had already paid $4,000 to a Southern California company that made zero progress on his behalf. The company was then sold to a South Bay company.

With $4,000 in jeopardy and renewed hope that the new company would help him, the man waited for resolutions to be negotiated by this company. The house was eventually foreclosed by the lender.

Consumer protection regulations and education have subsequently been put in place to prevent this from happening during the past few years. However, the saga continues and I suspect it will not stop until there are no more distressed homes.

By all account, the problem is much more extensive than reported because some predators could be people the homeowners know, such as friends, neighbors, church members or seemly legitimate businesses.  Often the victims are too distraught, too embarrassed or just give up instead of reporting the fraud.

This is not to say that there are no legitimate, reputable companies that help consumers with their loan modifications. I have also heard of successful stories to that effect.

Some Fraud Scam Warning Signs:

  • Up-front payments are required
  • Requests not to contact the lender or your lawyer
  • Blanket promise to stop foreclosure process
  • Request to sign document without adequate review
  • Ask for signatures on a grant deed or deed of trust

Here is basic advice:

  • Never pay cash
  • Never submit an up-front fee
  • Never give in under pressure
  • Check with the Better Business Bureau
  • Check on References
  • Make sure to get everything in writing

When in doubt, discuss this in confidential with your trusted advisors. And remember, “If it sounds too good to be true, it probably is.”

References:

  • Click for CAR Rising Loan Fraud video
  • CAR joined with local district attorneys in Sacramento, San Diego and Bakersfield and held news conferences to get the word out more widely.  View some TV coverage.
  • Click for CAR’s Stop Mortgage Fraud page to learn how to protect yourself from loan fraud, learn who to contact if in danger of foreclosure, get information about the national settlement, and find out where to turn if you have been a scam victim. 

This post is contributed by a community member. The views expressed in this blog are those of the author and do not necessarily reflect those of Patch Media Corporation. Everyone is welcome to submit a post to Patch. If you'd like to post a blog, go here to get started.

WFMortModScam July 16, 2012 at 04:58 PM
If the banks would deal with homeowners in good faith instead of playing stupid games with "lost" paperwork, dissembling about the requirements to qualify for a mod and lying about trial mods leading to permanent mods, none of these loan modification scammers would get any business. In my opinion, the biggest loan mod predators are the big banks themselves - Bank of America, Wells Fargo, Chase and the rest. http://www.wellsfargomortgagemodscam.com
Sylvia Barry July 16, 2012 at 07:21 PM
I am not an expert in loan modification, but I have heard quite a few homeowners where there is absolutely no chance of getting their loans modified (such as greatly diminished income, or no income at all); getting letters from the lenders encouraging them to modify their loans. Many waited for gut-wrenching months before learning the inevitable. On the other hand, there are also different 'investors' behind the loans. After satisfying the major criteria, they might have different rules (other than the obvious rules), which may allow one loan be modified but not a similar one. Being able to publish easy understanding, general rules would have helped a lot of borrowers that are in distress.
Sylvia Barry July 25, 2012 at 08:00 PM
Just received - California orders $4 million in penalties in loan modifications .. http://www.latimes.com/business/money/la-fi-mo-penalties-loan-scam-20120724,0,5298149.story Personally, I don't believe it is enough because the consequence of getting scammed on this is not just losing that thousands of dollars of fees paid, but the fact these people could have lost their homes due to the scam!
Ryan Hickey August 15, 2012 at 04:43 PM
I am a loan modification expert. I know that homeowners who pay for help deserve to get help. If there are companies just robbing people then they should be criminally prosecuted, which is happening. However, Sylvia I don't think spitting in the face of every law firm and consulting firm that works legitimately on behalf of homeowners is a good way of providing a real solution for homeowners that read this article. Most often, it is better to have a professional and/or third party represent you in foreclosure than try to spear-head the process yourself. We are getting huge principal reductions, 2nd's wiped away and totally forgiven, term extensions, interest rate reductions, and other workout programs. I could go into more detail, but I have to get back to actually helping people stay in their homes... p.s. Many homeowners who couldn't afford their mortgages to begin with are living in houses for free, not making payments for years, just by hiring an attorney or arming themselves with real knowledge about securitizations, quit title actions, and litigation techniques. Either way, no matter how you slice this onion, the banks allowed hazardous paper to be written and people bit the hook. My personal professional advice is to hire someone who is actually knowledgeable about loan mods/foreclosure to handle your future in your home.
Sylvia Barry August 15, 2012 at 05:00 PM
Hi Ryan - I don't think I am 'spitting in the face of every law firm and consulting firm that works legitimately ...'. Instead, I only provided a list of 'warming sign' for people to watch out for; and those are from the References I provided. I also mentioned I have heard of successful stories right before that. If a firm is legitimate, I would assume their process would not raise the red flags as mentioned above. Thank you for the comment. If you know me, you would know that I am thrilled every time I hear a true loan modification story (unfortunately, that’s far and in between and I hope to hear a lot more). A true successful loan modification helps the homeowner to keep their house, prevent erosion of the housing market as we saw during the last few years and preserves the American (or most everybody) Dream. Sylvia
Ryan Hickey August 15, 2012 at 05:21 PM
I understand Sylvia. I have heard it all before. The fact of the matter is when folks knowingly enter into valid enforceable contracts the parties have duties and rights under the law. These blast emails and articles warning homeowners of scam artists is a scare tactic that in my opinion just promotes more fear and uncertainty. Lets stop making excuses for uneducated borrowers who continue to neglect research and blindly sign into contracts that may not be legit. IF YOU AS A HOMEOWNER WANT REAL HELP, ASCERTAIN PROFESSIONALS! --- It is really that simple. Arm yourself with knowledge.
Sylvia Barry August 15, 2012 at 06:10 PM
The fact of the matter is, when people are facing losing their homes, they are in major panic mode and they do tend to reach for every rope that are thrown to them; some real, others not. I believe the warnings from CAR and the State Attorney General are helpful and is part of the education to protect the borrowers, and not 'scare tactic' as you mentioned. I am also extremely busy, and would not have bothered to write this if I have not seen the damages first hand and feel strongly it's important to share with others. For people I know in similar situation, the first thing I ask them is if they have tried loan modification. Thanks! Sylvia

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