Mortgage Modification Originators: Here Comes The FTC

How many phone calls have I had over the last 12 months from "mortgage modification companies" promising thousands of dollars to me if would have my loan officers refer to them people who could not refinance but were in trouble. I said no, every time. Sometimes I had some laughable conversations with the people calling. Why did I not want to get involved?

(A) I'm a lender and have my own business I need to focus on. (B) Because I knew better and I knew this would be a headline in the very near future:

"Federal and State Agencies Crack Down on Mortgage Modification and Foreclosure Rescue Scams"

Right, your company isn't a scam. I know because that's what you've told me when you called me.

So what is the litmus test for a scam?

71 companies are using "deceptive ad practices" and are being sued or are under investigation

22 companies gave the impression they were associated with a Federal Agency (such as HUD) they are shut down and may be facing Federal criminal charges.

100's of companies charge upfront fees and are under investigation

Dozens of companies advertise a false success ratio and are being sued or are under investigation

Who is being investigated? Everyone from the originator to the mid-level employees and the company principles. If the originator made false statements, even as a result of training or information provided by the company, they can be held accountable under the law.

You can bet when activity like this is discovered by attorneys they are going to source out any people who feel they were harmed or slighted and create a class for a class action suit. Who can be named in the suit as defendants? All those same people from originators to company owners.

So, for all you loan officers and real estate agents out there who allied yourself with one of these companies (and the investigation list is growing daily) you may want to re-think your alliance, ask yourself if your company or you made any false statements, took money in advance, failed to deliver on guarantees or promises, and anyone has applied but not been issued a modification but you still made money.

Attorneys are able to take modifications as a case. They are allowed to charge a retainer fee. The only attorney I ever referred clients to asked for a $500 retainer fee which HE RETURNED TO THE CLIENT if the modification did not go through. There are a lot of modification companies out there who are owned and run by attorneys. That alone would never make them legit. How many attorneys are disbarred or sent to prison every year just for real estate fraud? Investment fraud? Insurance fraud?

Reader, if you are facing foreclosure call 1-866-HOPENOW or your local HUD office if you have already contacted your lender and they are not working with you. DO NOT STOP when the little hourly paid operator who answers the phone at your servicer says, "no". They do not have the authority to say anything else. The company hopes you get off the phone and find some way to fulfill your covenant to repay the loan you promised you would - that's why the first few people you talk to say "NO".

I will also post something about scamming from the other side, dead beat losers who just refuse to repay their mortgage even though they have made a life covenant with the lender to do so. But that's for another time.