LOAN MODIFICATION COMPANIES - New Business Model or Risky Scam? Chapter 2. Resources For Home Owners In Need of Loan Modification Advice.

By
Home Builder with CREST BACKYARD HOMES, ON THE LEVEL GENERAL & FACTORY BUILT HOME CONTRACTOR, TAG REAL ESTATE SALES & INVESTMENTS 521400, 1501015, 01795582

The mission for this chapter is to chronicle:

  1. How the bad guys came to get into the fray,

  2. How most scam operators work their cons. and

  3. How RE Brokers, Lenders Realtors, Agents, loan officers and most importantly the Homeowner can spot and avoid the con.

Note that, while we have indeed painted the Budding Loan Modification Vogue with a pretty broad brush. in no way am I implying that all loan modification programs are scams, nor are attorneys that participate in them greedy opportunists.

HOW THE BAD GUYS CAME TO GET INTO THE FRAY.  There are many hard working and sincere people endeavoring to do their level best for their clients and who are taking their plight quite seriously. It’s just unfortunate that we have human beings in our midst that can do such horrendous things to their fellow man/woman and still look at themselves in the mirror.

All things, be they insect, reptile, animal, plant life, human and yes even business models, evolve. This includes this cottage phenomenon called Loan Modifications.  We’ve already gone through one evolution and we’re about ready to evolve again. But let’s discuss the first generation Loan Modification Company or more aptly stated the outright SCAMS that have surfaced in the past couple of years. When scam artists realized there was a niche for opportunists to exploit desperate homeowners on the brink of foreclosure they were among the first to rise to the occasion. These guys specialize in taking advantage of someone’s misfortune and/or grief and have no morals, ethics or conscience. Following is one example of how they do it.

The scam artist doesn’t care about a pitchman’s (phone salesperson) background, education, experience or reputation. If they sound half way decent over the phone they’re hired. If they don’t produce within a few days their history. The scammers keep a help wanted add running 24/7 knowing that the attrition is going to be significant. It’s all part of the game plan. Their ads are come-ons promising huge commissions and bonuses.

HOW MOST SCAM OPERATORS WORK THEIR CONS.  They hire car salesmen, retail clerks, encyclopedia and vacuum cleaner salesmen and young enthusiastic newbies looking for a start in life. Then they couple them up with “Ole Pros” (professional con men along with a few ex-cons) who know how to separate unwary victims from their money. Their mission is to train and show all the others how to pull off the con. Sadly by the time the “Pros” get finished brain washing all these misguided souls they won’t even think their doing anything wrong. A lot of these people are young and naive and looking for a place to start a career, have never held a job more than a few months or are always looking for that pie in the sky opportunity to hit a lick.

I spoke with a gentleman who started selling LM’s in ’07. He was a car salesman for ten years before that. Then I spoke with a gal who came from the retail clothing industry and then a dynamic duo who worked for Circuit City. While there’s nothing wrong with these folks individually the problem starts with the fact that they are in no way, shape or form anywhere near qualified let alone adequately trained in this field. The very brief training they do receive is not about dealing with someone’s mortgage problem it’s about how to close a deal over the phone by getting a credit card number and an advanced fee.

THE BOILER ROOMS ARE BACK.  The hype that’s generated in these boiler rooms is not about helping desperate folks on the brink of the worst crisis of their lives and being genuinely compassionate and empathetic.  It’s about closing the deal and getting the money. “You’ve only got one chance to nail these Mooches”, “they’re Lay Downs” or “Get Me Done's” “Slam Dunks” or “you’ve just hit a Home Run” or” a Grand Slam” or you’ve “Stuffed Someone Into A High Gross Deal” This is the type of conversation that goes on in a boiler room environment every day. When they “Lay Away a Mooch”  there’s a big bell that gongs several times and everyone cheers the lucky pitchman for his success. After the shift it’s down to the local pub to Brag about all the Mooches you Bamboozled.

HIRING REAL ESTATE AGENTS FOR CREDIBILITY.  It didn’t take long for the complaints to start rearing their ugly heads to legal authorities and the bad press to start streaming down the streets. So a few raids and arrests later the scammers realized they would have to do something quickly our shut down their operation and go into hiding. So they quickly evolved to the second generation; Hiring licensed RE brokers, lenders and agents to make them look more legitimate and credible.

However, realizing they were dealing with a more sophisticated group of sales professionals they softened their tone and played the “We’re licensed RE professionals” game. They would put the professionals through training program so they would learn the pitch.  This proved to be pretty scary for a lot of otherwise honest and hardworking professionals.

It worked for several months and in some cases for that past couple of years. Business has been robust and the so called loss mitigation counselors (sales people) were and/or are making good money. To many former RE agents and lenders it started looking like the good ole days again. But then reality set in. Homeowners were getting very little if any satisfaction from these companies for all the large advance fees they were paying and the LM companies we starting to realize that they were playing hardball with the big boy lenders and not getting anywhere with most of their LM clients.

Well, simply hiring RE Professionals was not the answer and soon began generating a lot of heat whence more complaints started flying. District Attorneys and Attorneys General, Real Estate Commissions and NAR Associations of Realtors were deluged with disgruntled homeowners complaining that they had been duped by LM companies that were staffed with licensed and experienced RE pros who supposedly knew how to negotiate with lenders. Game Over.

MOVE UP TO ATTORNEY LOAN MODIFICATION FIRMS.  Now in walks the third generation LM business. Knowing that they were in the hot seat and that they had better run for cover or shift gears fast they started aligning themselves with attorneys. Not partnering, joint venturing, or in any way becoming part of the law firm via equity or ownership.  They pitched many law firms into letting them generate leads for them for a healthy fee. Of course many of these law firms, having been hit hard by the tight economy, jumped at the opportunity in order to realize an appreciable increase in revenues and cash flow.

Now just when it looked like they had finally established a comfortable and credible niche in walks the Obama Plan called “Making Homes Affordable” and it was Katy bar the doors. Attorneys by the hundreds climbed out from under rocks, hung their shingles and Walla overnight they were experienced loss mitigation specialists with a team of telephone pitchmen buying lists of delinquent homeowners from credit reporting agencies and other mailing list companies and alas a cottage industry is born.  The loan modification business is made for real estate attorney, knowing that in many states it is illegal for real estate licensees to negotiate loan modification proposals for home owners.

{Treasury Secretary, Tim Geithner said, “In the wake of all the publicity surrounding the Obama Plan called ‘Making Homes Affordable, it appears many unscrupulous players are now creating websites and other print marketing materials with fraudulent claims to lure in those seeking foreclosure assistance.”  “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. This Administration is deeply committed not just to providing at-risk homeowners with assistance but also to cracking down on anyone who seeks to defraud them.”

IDENTIFYING THE SCAM.  “The real problem it seems are the upfront fees loan modification companies (read scams) charge before any services are performed. Another possible fraudulent act is promising a loan modification is forthcoming. Many companies are using pseudo-government sounding names to allow the foreclosure victim to believe the company is part of the government or are authorized to participate in government assistance programs.

Attorney General Eric Holder said, “The Department of Justice’s message is simple: if you discriminate against borrowers or prey on vulnerable homeowners with fraudulent mortgage schemes, we will find you, and we will punish you.”}

SEE:  LOAN MODIFICATION COMPANIES - New Business Model or Risky Scam? Chapter 1.

Research Resources:   

Posted by

Why To Choose Us?

John DL Arenden, Broker 

TAG Real Estate Sales & Investments

TAG (The Arendsen Group) Real Estate Sales & Investments is a full service, one-stop, turnkey, family owned and operated real estate brokerage, General Contractor, Manufactured Home Contractor, Developer, Investor, Property Manager, Interior Design, Engineering, architectural, Landscape design, Expert Witness, Consulting, Curative Title and Troubleshooting company with over 100 years of combined experience in the San Diego real estate sales, construction, design & development arena.

 

 

 

 

SUBSCRIBE TO MY BLOG VIA EMAIL: Enter your email address:

Delivered by FeedBurner

 

 

close

This entry hasn't been re-blogged:

Re-Blogged By Re-Blogged At
Topic:
ActiveRain Community
Location:
California
Groups:
Active Rain Newbies
Twitter
AR Twitter Users
Tags:
mobile home finance
manufactured home financing
engineered certification
foundation insp inst
433a calif

Post a Comment
Spam prevention
Spam prevention
Show All Comments
Ambassador
2,740,947
Lenn Harley
Lenn Harley, Homefinders.com, MD & VA Homes and Real Estate - Leesburg, VA
Real Estate Broker - Virginia & Maryland

Good follow up.  We're all learning.  I was on the road today and, in about 3 hours of drive time, I heard no less than 5 commercials for "loan modification" companies.  Of course, there was also the usual refinance commerials offering to refinance to loans that no mortgage company would give.  It must have been in the fine print, which we don't get on radio commericals.

BTW, Justin D is a spammer.  I reported it.

Sep 02, 2009 10:05 PM #2
Rainmaker
985,918
Will Nesbitt
Nesbitt Realty at Condo Alexandria - Alexandria, VA
Nesbitt Realty is a family-run brokerage.

Thanks for the eye-opener.

Sep 02, 2009 10:24 PM #3
Rainer
128,905
Dan Quinn
The Eric Steart Group of Long & Foster Real Estate - Silver Spring, MD
Dan Quinn

Frankly, I had no idea that these loan modification companies have been around for so many years.  I thought this was a new phenomena due to the Obama plan to make homes affordable.

Thanks for pointing out what a danger there is out there to the consumer who is in need of help and unaware of the scams.  Scrutinize carefully any company you may choose to work with if you are interested in doing a loan modification.

Sep 03, 2009 01:46 AM #4
Ambassador
675,930
John DL Arendsen
CREST BACKYARD HOMES, ON THE LEVEL GENERAL & FACTORY BUILT HOME CONTRACTOR, TAG REAL ESTATE SALES & INVESTMENTS - Leucadia, CA
Crest Backyard Homes "ADU" dealer & Contractor

Thanks for all your help Lenn. You're a great mentor and the best 2nd grade school teacher I never had. I Deleted ole Justin before I even finished his cheap shot.

I'm not sure how long LM companies have been going on nationwide but they started in the San Diego aresa around the end of '06. The reason I know this is because one of them wanted to lease some commercial space from us about that time. In my next and final post about LM's I'm going to discuss the future of the entire LM community. I think you'll find it pretty interesting.

Sep 03, 2009 02:22 AM #5
Rainer
11,811
Shirley Walker
Core Group Realty - Boise, ID
ABR, CRS, GRI

So you are saying none of the LM Companies are legitimate?  

Sep 03, 2009 02:35 AM #6
Rainer
7,848
Julie Fontaine
Encinitas, CA

For those working in California here's the DRE's Desist and Refraining Orders list that includes several loan modification companies: http://secure.dre.ca.gov/publicasp/unlicenseddnr.asp that have been shut down. The California DRE has gotten more involved in investigating scam artists who just take people's money and run.

A loan modification company in California can actually collect up-front fees if they are registered and have an approved Advance Fee Agreement with the DRE in place.  This is only for homeowners who do not have a Notice of Default filed against them. Here's the link for the registered agents: http://www.dre.ca.gov/cons_adv_fees_list.asp

We recently spoke with one couple who paid an "attorney" $6,000 in up-front fees. Three months later they were not returning their phone calls...  It's a crime.

Sep 03, 2009 02:58 AM #7
Ambassador
675,930
John DL Arendsen
CREST BACKYARD HOMES, ON THE LEVEL GENERAL & FACTORY BUILT HOME CONTRACTOR, TAG REAL ESTATE SALES & INVESTMENTS - Leucadia, CA
Crest Backyard Homes "ADU" dealer & Contractor

Shirley, In no way am I saying that all LM companies are scams. I'm just trying to highlight the the MO of the ones that are. It's no secret. In fact its a matter of public record. The bad guys are being exposed everyday. But the good guys need to play their cards very close to the vest or they could get caught up in the mier as well do to the banks dragging their feet. My suggestion is not to take too many clients in up front until you know what you have coming out of the back end. Finally, I do recommend that folks in need of a LM seek it through an experienced RE attorney with a proven track record. But that's just my opinion whiich I think I'm still entitled too at this point.

 

Thanks for the heads up Julie. You actually pre-empted my next and final post on LM scams. But it's good to get the info out ASAP.

Sep 03, 2009 04:24 AM #8
Ambassador
675,930
John DL Arendsen
CREST BACKYARD HOMES, ON THE LEVEL GENERAL & FACTORY BUILT HOME CONTRACTOR, TAG REAL ESTATE SALES & INVESTMENTS - Leucadia, CA
Crest Backyard Homes "ADU" dealer & Contractor

 

Shirley, FYI: This is the 2nd item at the top of this post:

Note that, while we have indeed painted the Budding Loan Modification Vogue with a pretty broad brush. in no way am I implying that all loan modification programs are scams, nor are attorneys that participate in them greedy opportunists.

Sep 03, 2009 09:35 AM #9
Rainmaker
158,078
Carol Pease
JP & Associates Realtors - Bastrop, TX
CRS, Broker-Associate 512-721-6320

John & Jane:

I posted something about this a few weeks ago.  There must be lots of rocks these folks are crawling out from under all over this great country of ours.  Some of the people who are getting caught by these scammers could actually be helped, but when these guys get done with them it is too late.

Sep 03, 2009 03:41 PM #10
Anonymous
Richard Goates

Wow...great job on this.I know there was one company representative here locally that when really quizzed said there are no refunds and there are no guarantees...she said "the attorneys do a service and must be paid whether it goes through or not".....wow....consumer beware...what are you going to have to sue your attorney that didn't get your loan mod through? I don't think so.....

 

Search Redding Ca Real Estate here now....

Regards,

Richard Goates

Sep 04, 2009 04:43 AM #11
Rainmaker
354,843
Damon Gettier
Damon Gettier & Associates, REALTORS- Roanoke Va Short Sale Expert - Roanoke, VA
Broker/Owner ABRM, GRI, CDPE

There are no quick fixes to this mess but the longer it goes on the more crooks we will have getting into the public pockets.

Sep 04, 2009 02:53 PM #12
Ambassador
675,930
John DL Arendsen
CREST BACKYARD HOMES, ON THE LEVEL GENERAL & FACTORY BUILT HOME CONTRACTOR, TAG REAL ESTATE SALES & INVESTMENTS - Leucadia, CA
Crest Backyard Homes "ADU" dealer & Contractor

There would be one quick fix if we could get the government to mandate a modification across the board. This will be part of the subject of my next and final article on LM's

Sep 04, 2009 05:46 PM #13
Anonymous
Jeff Allan

I own a company that offers loan modifications.  And the real scam is the goverment who bailed out banks to the tune of $780,000,000,000!!  Lets open our eye and be honest, no 3rd party company should have to offer loan modifications (including my company) this should be the banks responsibility correct??  They supposedly have a loan agreement with the client, they know the mortgage is in default, why dont they offer immediatley a loan modification to save their interest?  See its amazing no one asks that question. 

Now I am not saying there aren't scams out there (there are in every business) but to bash this service as a whole I think is premature.  We have been responsible for hundreds of homes loans being modified and saving individuals biggest asset. People are scared and dont know what to do, and those who are trying recieve the run-around and give up.  Why is the process so complicated, maybe because they could care less the banks have their bailout why should it matter, right??  See I could right blogs all day on the "Goverment backed companies for loan mods" that have went out of business so there clean track record isn't as clean as they want us to believe. 

So what can you do?  Everyone do your home work, make a informed decision before you pick a company but there are good companies who do want to help.  Good luck to everyone.

 

Oct 12, 2009 07:56 AM #14
Ambassador
675,930
John DL Arendsen
CREST BACKYARD HOMES, ON THE LEVEL GENERAL & FACTORY BUILT HOME CONTRACTOR, TAG REAL ESTATE SALES & INVESTMENTS - Leucadia, CA
Crest Backyard Homes "ADU" dealer & Contractor

Jeff,

You obviously have not read all three of my posts on LM Companies. I am not painting the entire industry with a single broad brush. I do realize that there are good LM companies and I have a very good friend of mine who owns one. My beef is with the banks. That's the whole jest of my message. I think it's incumbant on the government to mandate an across the board write down to 85% of today's realistically appraised value on all the loans the banks made from around 2003 through 2007 at least and maybe more. Then the entire RE market can reset the bar to the new value standard. The bailout money could go back to the investors so they don't take it in the shorts and we could be on the road to recovery. But that's just my opinion and I'm no Harverd BS, MS, PHD, DDS or LLP so what do I know. All I do know is that what the govenrment's doing right now is bankrupting our Country and our Children's future and that really urks me to no end.

Thanks for your comment.

John

Oct 12, 2009 08:19 AM #15
Rainer
6,018
Tom Banks
Irvine, CA

Here is an answer to prayer:

SB 94 just passed doing away with Advanced Fees 10-11-09.  I wonder if this is only for California Properties or does it affect all states a broker does loan mods for. The inquiry is because I was going to join a company doing loan mods but discovered they were still taking fees upfront.  Aria and Associates claimed that they are exempt from this law because they are not doing California Properties.  Any insight? 

I am avoiding my work with them at this time but would like to know.

Oct 21, 2009 11:00 AM #16
Ambassador
675,930
John DL Arendsen
CREST BACKYARD HOMES, ON THE LEVEL GENERAL & FACTORY BUILT HOME CONTRACTOR, TAG REAL ESTATE SALES & INVESTMENTS - Leucadia, CA
Crest Backyard Homes "ADU" dealer & Contractor

Allen, There are just too many of these companies to keep track of and frankly I'm not even trying. The best thing to do is check them out thoroughly i.e. google searches under LM scams, Attorneys General, FBI and local law enforcement, etc,  and then even tread lightly into that arena.

There's going to be a big shake up in the industry overall and personally I think the FED will intervene and mandate to the banks that they've loaned all this bail out money to to start addressing these bad loans ASAP. If this happens it will pretty much do away with most of these companies.

I think in the end game the only soldiers that will be left standing are attorneys dealing with predator lending issues. The rest of the foreclosure issues I truly feel will be addressed by the banks respectively. But that's just a loose cannon opinion and it's only based on a gut feeling so none of this gibberish has probably given you any solace let alone a basis for a decision.

Just be very careful about anything you're putting your signature let alone credibility and reputation on. Life's too short to get involved with something that could wrap you up in knots for years should you get involved with something unscrupulous.

Oct 21, 2009 04:36 PM #17
Post a Comment
Spam prevention
Show All Comments

What's the reason you're reporting this blog entry?

Are you sure you want to report this blog entry as spam?

Ambassador
675,930

John DL Arendsen

Crest Backyard Homes "ADU" dealer & Contractor
Questions about Manufactured Housing?
*
*
*
*
Spam prevention

Additional Information