Carolyn Said, SF Chronicle Staff WriterExiled Nigerian princes are old hat. The hottest come-on these days, clogging e-mail in-boxes, voice mail and radio airwaves, goes something like this: "Are you struggling with your mortgage? President Obama approved the new federal loan modification program. We can help lower your mortgage payment."
It's the foreclosure-rescue scheme, given up-to-the-minute credence by the fact that the president has in fact endorsed loan modifications, the reworking of home loans to make them more affordable.
Scores of individuals and companies have sprung into action, marketing their services to help homeowners stave off foreclosure. They charge thousands of dollars and promise to deliver huge monthly savings on mortgage payments.
With a record 5.4 million U.S. homeowners behind on mortgage payments, according to the Mortgage Bankers Association, the pool of people desperate for help is huge.
But the services these "loan negotiators" provide generally are steps homeowners could take themselves, with little or no help. Those steps include contacting their lender, assembling their financial documents and writing a letter demonstrating hardship.
For those who want assistance, free help is available from counseling agencies supported by the U.S. Department of Housing and Urban Development or the industry-backed HOPE hot line. And no one other than a lender can guarantee that a homeowner will qualify for reduced payments.
"People are in such a desperate place that it's low-hanging fruit," said Lisa Sitkin, an attorney with Housing and Economic Rights Advocates in Oakland. "We get calls (all the time) from people who paid someone to modify their loan" and never got the assistance.
Last week, Attorney General Jerry Brown warned homeowners to avoid mortgage scams masquerading as foreclosure assistance.
"Californians should be deeply skeptical of anyone who demands money up front and makes extravagant promises that they can save their home," he said in a statement.
Legitimate operators
Some loan modification consultants legitimately do try to negotiate lower payments. Many are former real estate agents, mortgage brokers or title agents. Craigslist last week had 61 help-wanted ads for loan mod reps throughout the Bay Area. Many ads pitched it as a patriotic way for people to help consumers, the country and themselves.
Aaron Ralls, a former corrections officer, works as an account executive for RJV Modifications, a Roseville (Placer County) company that charges $3,885 for a loan modification. The 17 account executives who handle loan modifications are paid on commission. He declined to state the amount.
Ralls said his company returns clients' money if it cannot secure them a lower mortgage payment, and turns away clients who seem unlikely to qualify for a modification because they don't have enough income.
"Whenever clients ask if they can do it themselves, I tell them, 'You absolutely can, but it's very hard because you get the runaround,' " he said. "You're calling the phone centers, getting the runaround, chasing fax machines. We do it all for the client."
Nasim Pakmanesh, production manager at Help-U-Mod in Walnut Creek, said his company's business model is to provide "forensic loan audits" for $1,500, then to refer clients to affiliated attorneys who charge about $1,000 to pursue a loan modification. He said the audit looks through the original loan documents to discover errors made when the loan was originated.
With the audit, "the attorney has more ammo to work with to negotiate for their clients," he said. "Instead of going in and saying, 'My clients can't afford the home and have a hardship,' they're saying, 'You guys approved a loan you shouldn't have - so what can you do for my clients?' Our audit will definitely increase the chances" of getting a loan modification.
'A feeding frenzy'
But Sitkin of Housing and Economic Rights Advocates said she doesn't think forensic loan audits accomplish anything beside sounding impressive.
"People are really proud when they tell me that they got it, but it's a false hope that it will stop foreclosure," she said.
Norma Garcia, senior attorney at the West Coast office of Consumers Union, said she is troubled that the loan-mod services are basically unregulated.
"Often it's not illegal to do what they're doing, but our concern is that some of the people who caused the mortgage meltdown are now profiting from it," she said. "It's a feeding frenzy in a loop. They're taking advantage of uninformed consumers to get money out of their ignorance."
Some loan-mod agents are out-and-out scammers.
"A lot of sham companies and con artists promise these vulnerable homeowners that if you just give us some money, we can do a loan modification, you can stay in your house and get your payment reduced," said Tom Pool, a spokesman for the California Department of Real Estate. "It is troubling that they're preying on those who don't have money to begin with. In many cases, the consumers use their credit card to pay the fees."
2 sent to prison
Last week, two loan-modification operators in Southern California were sent to prison for up to six years for grand theft.
"Ring members promised victims they would renegotiate their mortgages and reduce monthly payments," the attorney general's office said in a statement. After collecting up-front fees of $1,500 to $5,000, they "pocketed the money and did nothing to help victims."
Up-front fees, in fact, are one clear sign of a potential fraud, Pool said. California law strictly regulates how real estate professionals can collect advance fees, including a requirement that they have a contract approved by the Department of Real Estate. Homeowners can check the department's Web site (www.dre.ca.gov/mlb_adv_fees.html) to see whether that is the case.
"What we find is the rogue operators have flimsy contracts that don't meet the standard of current law," Pool said.
Gary Kishner, a spokesman for mortgage giant Chase, said he couldn't comment directly on loan modification services but added: "We encourage our customers to contact us directly."
Beware of loan modification offers
• There is no fee to talk to your lender or a HUD-approved housing counselor about a loan modification. A list of counseling agencies is at links.sfgate.com/ZMW. You can also call the HOPE hot line at (888) 995-4673 or online at www.995hope.org
• Beware of paying for housing counseling or loan modification assistance. The California Department of Real Estate offers advice on loan mod companies at www.dre.ca.gov/mlb_adv _fees.html. Check out attorneys at the State Bar of California's Web site, www.calbar.ca.gov
• Beware of anyone who offers to save your home if you sign or transfer over the deed to your house. Do not sign over the deed to your property unless you are working directly with your mortgage company to forgive your debt.
• Never make your mortgage payments to anyone other than your loan servicer without its approval.
It's the foreclosure-rescue scheme, given up-to-the-minute credence by the fact that the president has in fact endorsed loan modifications, the reworking of home loans to make them more affordable.
Scores of individuals and companies have sprung into action, marketing their services to help homeowners stave off foreclosure. They charge thousands of dollars and promise to deliver huge monthly savings on mortgage payments.
With a record 5.4 million U.S. homeowners behind on mortgage payments, according to the Mortgage Bankers Association, the pool of people desperate for help is huge.
But the services these "loan negotiators" provide generally are steps homeowners could take themselves, with little or no help. Those steps include contacting their lender, assembling their financial documents and writing a letter demonstrating hardship.
For those who want assistance, free help is available from counseling agencies supported by the U.S. Department of Housing and Urban Development or the industry-backed HOPE hot line. And no one other than a lender can guarantee that a homeowner will qualify for reduced payments.
"People are in such a desperate place that it's low-hanging fruit," said Lisa Sitkin, an attorney with Housing and Economic Rights Advocates in Oakland. "We get calls (all the time) from people who paid someone to modify their loan" and never got the assistance.
Last week, Attorney General Jerry Brown warned homeowners to avoid mortgage scams masquerading as foreclosure assistance.
"Californians should be deeply skeptical of anyone who demands money up front and makes extravagant promises that they can save their home," he said in a statement.
Legitimate operators
Some loan modification consultants legitimately do try to negotiate lower payments. Many are former real estate agents, mortgage brokers or title agents. Craigslist last week had 61 help-wanted ads for loan mod reps throughout the Bay Area. Many ads pitched it as a patriotic way for people to help consumers, the country and themselves.
Aaron Ralls, a former corrections officer, works as an account executive for RJV Modifications, a Roseville (Placer County) company that charges $3,885 for a loan modification. The 17 account executives who handle loan modifications are paid on commission. He declined to state the amount.
Ralls said his company returns clients' money if it cannot secure them a lower mortgage payment, and turns away clients who seem unlikely to qualify for a modification because they don't have enough income.
"Whenever clients ask if they can do it themselves, I tell them, 'You absolutely can, but it's very hard because you get the runaround,' " he said. "You're calling the phone centers, getting the runaround, chasing fax machines. We do it all for the client."
Nasim Pakmanesh, production manager at Help-U-Mod in Walnut Creek, said his company's business model is to provide "forensic loan audits" for $1,500, then to refer clients to affiliated attorneys who charge about $1,000 to pursue a loan modification. He said the audit looks through the original loan documents to discover errors made when the loan was originated.
With the audit, "the attorney has more ammo to work with to negotiate for their clients," he said. "Instead of going in and saying, 'My clients can't afford the home and have a hardship,' they're saying, 'You guys approved a loan you shouldn't have - so what can you do for my clients?' Our audit will definitely increase the chances" of getting a loan modification.
'A feeding frenzy'
But Sitkin of Housing and Economic Rights Advocates said she doesn't think forensic loan audits accomplish anything beside sounding impressive.
"People are really proud when they tell me that they got it, but it's a false hope that it will stop foreclosure," she said.
Norma Garcia, senior attorney at the West Coast office of Consumers Union, said she is troubled that the loan-mod services are basically unregulated.
"Often it's not illegal to do what they're doing, but our concern is that some of the people who caused the mortgage meltdown are now profiting from it," she said. "It's a feeding frenzy in a loop. They're taking advantage of uninformed consumers to get money out of their ignorance."
Some loan-mod agents are out-and-out scammers.
"A lot of sham companies and con artists promise these vulnerable homeowners that if you just give us some money, we can do a loan modification, you can stay in your house and get your payment reduced," said Tom Pool, a spokesman for the California Department of Real Estate. "It is troubling that they're preying on those who don't have money to begin with. In many cases, the consumers use their credit card to pay the fees."
2 sent to prison
Last week, two loan-modification operators in Southern California were sent to prison for up to six years for grand theft.
"Ring members promised victims they would renegotiate their mortgages and reduce monthly payments," the attorney general's office said in a statement. After collecting up-front fees of $1,500 to $5,000, they "pocketed the money and did nothing to help victims."
Up-front fees, in fact, are one clear sign of a potential fraud, Pool said. California law strictly regulates how real estate professionals can collect advance fees, including a requirement that they have a contract approved by the Department of Real Estate. Homeowners can check the department's Web site (www.dre.ca.gov/mlb_adv_fees.html) to see whether that is the case.
"What we find is the rogue operators have flimsy contracts that don't meet the standard of current law," Pool said.
Gary Kishner, a spokesman for mortgage giant Chase, said he couldn't comment directly on loan modification services but added: "We encourage our customers to contact us directly."
Beware of loan modification offers
• There is no fee to talk to your lender or a HUD-approved housing counselor about a loan modification. A list of counseling agencies is at links.sfgate.com/ZMW. You can also call the HOPE hot line at (888) 995-4673 or online at www.995hope.org
• Beware of paying for housing counseling or loan modification assistance. The California Department of Real Estate offers advice on loan mod companies at www.dre.ca.gov/mlb_adv _fees.html. Check out attorneys at the State Bar of California's Web site, www.calbar.ca.gov
• Beware of anyone who offers to save your home if you sign or transfer over the deed to your house. Do not sign over the deed to your property unless you are working directly with your mortgage company to forgive your debt.
• Never make your mortgage payments to anyone other than your loan servicer without its approval.
• Read full details on the administration housing plan at www.financialstability.gov
Sources: Financialstability.gov, California attorney general
E-mail Carolyn Said at csaid@sfchronicle.com.
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1 comment:
To make a plan of action, never pay somebody a lot of money to help you avoid foreclosure and educating yourself is the most important step to take when facing foreclosure.
In that way, your credit rating is maintain and your home is still in your hands.
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