MORTGAGE EXPERT, DETROIT, BIRMINGHAM, BLOOMFIELD, ROCHESTER, ROYAL OAK, TROY, MICHIGAN
-- DETROIT, MI – Over the last several weeks I’ve noticed a substantial increase in the number of loan modification companies being investigated by various government agencies.
All I can say is that it’s about time.
Now don’t misinterpret that statement - I believe that loan modifications may be part of a viable solution in getting our country out of the current housing crisis, although it’s too soon to determine their actual long-term effectiveness.
I also have nothing against loan modification companies in general nor the people that work at them. I’ve met or connected with many individuals that are intent on really helping people and do their best to do so.
Lastly, many homeowners do need some type of assistance as lenders don’t have their best interests in mind when they do loan modifications and many lenders draw the process out seemingly forever.
On the other hand, I’ve personally heard many stories from homeowners victimized by loan modification companies, have heard the same stories from mortgage associates and have read many more on the internet.
From Subprime to Loan Mods
I predicted over a year ago that loan modification companies would become the new subprime “churn & burn” debacle. This was triggered by my observations that many local subprime loan originators were flocking to do loan modifications. I even heard several stories of these originators approaching the same clients they’d put in subprime loans, with offers to now do loan modifications for them.
There really is no barrier of entry to do loan modifications. All you need is a phone and the ability to find clients. Finding clients is easy with so many homeowners struggling with their mortgage payment.
This should all sound familiar as much of it applied to the mortgage industry in general until recently, when state governments started requiring individual licensing of loan originators and the federal government created a national registration system.
When Michigan enacted its Loan Officer Registration Act, April 1, 2009, the state expected 10,000 to register based on past data. To date only 3141 have met the requirements of 24 hours of class time, passed a multiple choice test and background screening. How many of the unregistered do you think are now using their limited mortgage knowledge to do loan modifications?
Desperate People do Desperate Things
One would think that a homeowner, burned by a bad mortgage, would be a bit more cautious when considering a loan modification.
The number of loan mod companies popping up however, prove otherwise. It’s basic supply and demand – the numbers of these companies wouldn’t be expanding if there weren’t desperate homeowners to support them.
So, how do homeowners get burned by these companies? In no particular order:
- Paying upfront fees for a modification never completed.
- Being told they’ll get a principal balance reduction, when in reality it rarely happens.
- Getting approved for a modification that raises their payment or insignificantly lowers it.
- Following advice to not contact their lenders during the loan mod process, only to get foreclosed on.
- Not being made fully aware of the possible credit damage, legal issues and tax consequences.
It’s all boils down to these companies over-promising and under-delivering.
What Took the Government So Long to Act?
If I saw this problem coming over a year ago, you’d think the smart people in our government would’ve saw it coming also.
In a recent informal poll of mortgage originators by “Think Big Work Small”, 81% responded that over 50% of those doing loan modifications are “rats”.
Unfortunately, just like with the mortgage meltdown and the banking crisis, the government only seems to act after the damage has already been done. Here’s a list of the agencies currently chasing loan mod companies:
- Federal Trade Commission
- United States Attorney’s Office for the Central District of California
- Arizona Attorney General’s Office
- California Department of Justice
- California Department of Real Estate
- State Bar of California
- Colorado Attorney General’s Office
- Idaho Attorney General’s Office
- Illinois Attorney General’s Office
- Iowa Department of Justice
- Kansas Attorney General’s Office
- Maine Attorney General’s Office
- Maine Department of Professional and Financial Regulation, Bureau of Consumer Protection
- Maryland Department of Labor, Licensing, and Regulation, Office of the Commissioner of Financial Regulation
- Massachusetts Attorney General’s Office
- Michigan Attorney General’s Office
- Missouri Attorney General’s Office
- New Jersey Attorney General’s Office
- New Jersey Department of Banking and Insurance
- New Mexico Attorney General’s Office, Consumer Protection Division
- North Carolina Department of Justice
- Ohio Attorney General’s Office
- Oregon Department of Justice
- Texas Attorney General’s Office
- Washington Attorney General’s Office
Charges are being filed because of deceptive and/or false advertising (Section 5 of the FTC Act), charging upfront for services before rendered, unlicensed activities, mail fraud, attorney misconduct and several others.
Solutions
The Obama administration really needs to step up and address this issue quickly. The crooks and sharks need to be forced out of the industry to protect homeowners. Honest professionals also need protection - from overzealous government agencies. It’d be a real shame if those that were actually doing good things for homeowners were put out of business, fined or jailed.
An easy to implement option would be to allow loan modifications to only be done by licensed mortgage companies and attorneys. The mechanisms are already in place across the country to control this.
A better solution would be for the administration to create a national solution instead of letting all 50 states come up with their individual plans.
For a list of the loan modification companies currently be investigated, click here and then click on “preview”.
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Before purchasing a property, primarily secure that you have enough source of income. Be certain that you have sufficient funds on a long-term basis to insure that you'll be capable of paying your monthly amortization.
ReplyDeleteI do legal Loan Modification with no advanced fees outlined by Department of Real Estate, I followed there guidelines to establish when a fee is earned. I did a 495 for submission and 495 for talking and making arrangements with there lender. We have 95% offers from the lenders. We have 76% accept the offers. The 5% and those that do not like their offers turn on my company for submission fee, it not high and it is the cost we pay staff to do the work. My company has never made more then the department has cost me. The DRE is now trying to fine and damage my good standing as a broker. All for 6 files missing fax conformations (confirming completion of the submission), 6 out of 165. I got them supplemental proof that it was done before the fee was colleted and they are still moving forward with the fines and have already attached reprimands to my license. Those reprimands describe me as a criminal, one that shamed me, my wife and my family business...
ReplyDeleteIf you are think of helping those in trouble with loan modification don’t. I would tell you it is a witch hunt and it is best left alone. The consumer is on there own. And I am sure that is what the republicans of California want. They don't want people to get help it cost the banks to much...
It is nice to see big business and government working together...
If you do not think it is a witch hunt watch this:
http://www.kcra.com/politics/20465430/detail.html
http://www.reuters.com/article/gc03/idUSTRE57B5DI20090812
It is clear that no company is free of business mistakes and will not be able to off set this level of scrutiny. Nor will professional business owners will take the risk of grouping themselves in that shady umbrella. The BBB rated a new company F-, they justified the rate sighting industry and experience… It is clear if you help those in with loan modification even those with valid hardships you will be attacked… Oddly that leaves people with no one to turn to for professional help.
Who is hurt by not having 3rd party help:
• People with limited literacy
• People with English as a 2nd language
• Hardships that leave them emotional & Physically week.
• Those with limited understanding of Loan guidelines and How they work.
• Those with limited knowledge of the rights as borrowers
• Those with limited knowledge of the Making Homes Affordable Plan and it benefits.
• Those afraid to take on a multinational Bank, supported by the government to focus on there best interest.
The group most hurt is the poor, un-educated and social economical challenged. Oddly, this was who President Obama had outlined to help…
I do not know how to address those that charge 3000.00 or more. I also do not know how to address that the private sector is seen as the predator in this problem. When in realty the private sector is best suited to give each homeowner professional request for help.
The non profits have little man power, and limited funding. Oddly, our local group is funded in part by a grant from Bank of America (Country Wide). You have to wonder how many B of A loans are modified with the agency they fund. The rest of the support is from the FED who’s primary job is to keep banking stable, not to help and increase losses & claims. It in no wonder they send in one person to organize a rage tag group of non profit. He is failure is there victory, the banks should not govern loan modification.
I do know that charging 990.00 has helped a couple of hundred of my clients and those that don’t get help try to shut me down. Avoid this trap… Your life is more important then trying to help others.
This is true. But this government action has came too late. Because by this time many people suffered at their hands. Although this is late but nice step initiated by government.
ReplyDelete