The loan modification business must be the only booming industry right now. Unfortunately it's out of control. I believe in the concept of banks working with borrowers to help them stay in their home but these hard times have opened the floodgates to many vultures.
These people are generally the same people that helped put many borrowers into option arm loans. Option arm loans were loans that paid up to 3% rebates and to the mortgage broker and it gave borrowers 4 payment options. The options were a 15 year amortized payment, 30 year amortized payment, interest only payment, and a negative amortization payment. Guess which payment most borrowers chose? Ding ding ding, you guessed it the negative amortization cause it was the smaller payment. This type of borrowing inflated prices and put many people in a home that they normally could not afford.
Now these same people are charging borrowers up front fees to "save their home". If you go to http://www.hud.gov you can click on the programs offered by HUD to modify loans. Yes these programs are difficult and there's a lot of running around that one has to do but you are asking a lender to modify a contract that you agreed to. Yes some people would rather pay upfront to get this done but then they risk dealing with a company that might be a little shady. Many of these companies claim to have an attorney represent you but they actually are an assembly line of people using the name of an attorney in case anyone wants to know.
I am not against companies getting paid upfront fees for offering a service but since we do pay taxes for a Department of Real Estate (DRE) than I want them to protect the borrowers. I always say that the government's priority is our defense and to protect us from fraud. People now are so desperate that they are willing to pay almost anyone with a good sales pitch. The DRE needs to start cracking down on these companies and make a list of service providers that have proven to be on the up and up. They could all start by getting licensed by the DRE and making sure all of its representatives are licensed.
The people of California need the DRE to be proactive and we as real estate agents need to continue to reach out and let these borrowers know that they have options.