Homeowners are STILL being ripped off by Loan Modification Companies!

Coeur d'Alene, Idaho

It's been a while since loan modification alerts have been a hot topic in the news, but an encounter I had this week reminded me that the scammers are alive and well, and still preying on distressed homeowners. I wrote about a crackdown called Operation Loan Lies back in 2009 when Idaho Attorney General Lawrence Wasden shut down Apply 2 Save, a loan modification assistance company based in Coeur d'Alene after receiving 400 complaints. Distressed homeowners is several states had paid hefty sums to Apply 2 Save for assistance in obtaining loan modifications, and got nothing in return.

There are still companies in operation that for a hefty fee, offer to help homeowners through the loan modification application process. What you need to know is that there is nothing they can do that you can't do for yourself! The problem is the false hope they give homeowners in order to get their money. Yes, a modification attempt is a frustrating and lengthy adventure, but even with assistance, it is a frustrating and lengthy adventure. And usually, unsuccessful. Whether you have paid for assistance you don't need, or not.

I got a call this week from a woman who had received a prospecting letter I mailed her.  I routinely send these letters to homeowners who show up on the public Notice Of Default list.  I offer to answer questions and advise them on whether or not short selling is a good option to avoid foreclosure under their indvidual circumstances.  The filing of the Notice Of Default is the first step when a lender legally begins the foreclosure process.

She was perplexed.  Why had I sent that letter to her, she wasn't in foreclosure.  In fact, she had "a lawyer who was getting her a loan modification."  The lawyer said her lender couldn't foreclose if she was attempting a modification.  We spoke for a few minutes and decided to meet to discuss her situation.

We met at her home, where I showed her a copy of the publicly recorded Notice Of Default that had been filed nearly 2 months ago, on February 13th.  Yes, the home was in foreclosure.  She was shocked. 

As her story unraveled, my blood began to boil.  

The "lawyer" she is being represented by is The Foreclosure Law Center, PC.  Several things she told me, alarmed me and sent the red flags flying. 

1. She was told never, under any circumstances, to communicate directly with her lender.  NOT ACCEPTABLE!
2. She was told that in order to obtain a loan modification she needed to be late on her mortgage payments.  NOT TRUE!
3. She was told that her lender could not foreclose on her while a loan modification was being worked out.  NOT TRUE!

She showed me her agreement with "the lawyer."  It outlined a process with $700 payments due at certain intervals.  She had stopped making her mortgage payments in August, instead making the first of five $700 payments required to get her loan modification.  Remember, she was falsely told she couldn't get a modification if her mortgage was current.  At five times as the months wore on, $700 payments were required, and the good woman had faithfully made them, instead of mortgage payments.  The agreement tells her that if her mortgage hasn't been modified by the time that she has paid the maximum $3500, there would be no further charges for services performed. 

The first thing that made alarms go off at this financial arrangement is that
The Foreclosure Law Center is financially incentivized to
string people along with false hope move slowly and drag it out as long as possible.

I asked her to call her mortgage company in the morning and ask what the status of her mortgage was.  The next day I got a phone call.  Her lender confirmed she was indeed in foreclosure status.  What about her loan modification?  (A mortgage can be in foreclosure status or modification status, but it can't be in both.)  She was told that some modification paperwork had been received, but the application packet was incomplete so the process to foreclose on the home had begun.  This was what the $3500 to "her lawyer" for modification assistance had bought her. 

Here's the kicker.  All of this could have been avoided.  Based on the income of this homeowner, she was never a candidate for a modification!  The very simple fact is that she works part time and there is no question that her earnings are far beneath what she would need to qualify for a loan modification.  It CAN'T happen.  A homeowner has to have enough income to financially qualify for the modified loan. 

Now, several months behind in mortgage payments, with no savings or resources, and having paid The Foreclosure Law Center the maximum $3500, this homeowner is between a rock and a hard place.  In order to halt the foreclosure proceedings she needs to come up with the entire amount in arrears, plus late charges, legal fees and interest.  She doesn't have it.

I will help her short sell her lovely home, and she will get $3000 relocation assistance from her lender at closing.  Before she went into default, there may have been other options, but at this point, this is absolutely the best she can hope for.  Unless she happens to come up with a winning lottery ticket...

Here are some posts of mine from past years about Loan Modification Issues.