Loan Modification Scams and Predatory Loan Modifications

Homeowner Alert: They went from selling you a toxic home and loan and now they want to “rescue” you from foreclosure from those same homes and loans they sold you last year. Should you trust these so-called loan modification and short sale experts that are busting down your door to help you? Hopefully after you read this, you will not answer your door when these crooks come knocking to save you!

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Take for example this email I received this morning from a struggling homeowner this morning:

Hi, I’m late in paying my mortgage 30 days due to lose of hours at work and may be losing up to $1,000-$1,200 in pay due to this. I saw a loan modification company and they said it would take $1,000 down to start the process and in 3-5 days to tell me if I could get my mortgage modification and dropped 900-1,200 a month. They said in the first 3-5 days that if I could not get a loan mod, it would only cost me $250 to look at my application is that good or bad? My loan amount is 370,000 and monthly payment w/taxes is 2,791.00 can anything be done? Thanks

My Response:

Yes, this is very bad. DO NOT TRUST THESE GUYS!!!!

This scam is really a $250 robbery and theft case to me and is probably being operated on the kitchen table by and ex- loan officer or Realtor. Those $250 checks a day quickly add up to $10,000 months and $100,000 years for selling what equates to loan modification snake oil.

Maybe these scammers put the fee at $250 because that is a misdemeanor and anything over $500 is a felony? Clever scammers these days!

I thought this scam was pretty clever since it really plays reverse psychology on the homeowner as if this company is truly looking out for their best interests. A homeowner thinks $250 is the most they’ll loose and at least they’ll know if they can get a modification. But in reality it is a $250 a pop scam and the advice is most likely not what the homeowner needs and may in fact lead that borrower into foreclosure.

Welcome to predatory loan modifications and business booming!

Back when I first started researching and blogging in mid 2007’, there was not one mortgage or real estate professional that was offering loan modifications in the world (or at least that I could find on the internet). Most everyone and their mother were still trying to ride the highly lucrative subprime and housing bubble train where they made $10,000-$40,000 commissions on one loan or one home at a time.

Many of these so called professionals were million dollar a year commission hitters living in million dollar homes that they bought from selling and originating hundreds of homes and loans in their subprime glory days.

I know because I have been tracking and researching this trend over at websites where these so called professionals congregate like ActiveRain.com and BrokerOutpost.com. Many of them have blogs advertising their illegal companies like its the wild, wild west of loan modifications and short sales.

Now that the subprime snake oil is gone, it looks like the new oil of choice is loan modifications and its selling like hot cakes or at the very least, like subprime loans is 2005!

Hell, everyones an expert now and they even have books to prove it, seminars to pawn their wares and small fees to teach you how they do it!

Over the Past year, these agents and brokers slowly jumped the home saving train and now I think there is not a broker in the country that is not offering loan modifications and or short sales. Their advertisements boast that they went from “I sell a gazillion homes and loans” to “I save a gallion homes and I am your neighborhood loan modification and short sale expert!”

Barf! Is there any truth in advertising and marketing in regards to the real estate and mortgage industry. Can someone please call the FTC NOW?!

Literally, over night, the industry exploded with many of the same scammers who duped borrowers and placed homeowners in hopeless and predatory loans.

Now many of these mortgage and Realtor chumps are losing their homes, cars, wives, families and sanity. But guess what? They are very much still in business because they got to pay the bills and will do whatever it takes to make ends meet. Many, who when they had money in their pocket would never consider breaking the law. Now, with no money in their pocket and the facing foreclosure themselves, promises of ethics and fiduciary duties are out the window.

Hell, this is about survival and putting food on the table for many of these struggling real estate and mortgage ex=professionals and if they have to commit a crime here and there and they are not robbing the local 7-11, then that is OK with them.

Apparently it is OK to rob homeowners though.

I spoke with California Attorney Mark N. Zanides who performs loan modifications in Santa Ana (Orange County) and he said this about these rogue loan modification companies:

“What most Californians don’t know is that section 2945 of the California Civil Code requires “foreclosure consultants”, that is, people who do loan modifications, to be registered with the Department of Real Estate before an advance fees can be accepted. Lawyers and people who work on modifications on the lender side are exempt.

Only 15 or so companies are registered in California.

Moreover, Section 2945 also states that even if registered, a loan mod company cannot accept advance fees after a Notice of Default has been served.

So most loan mod companies in California are operating illegally. To date, the DRE has shut down only two companies, and is investigating others. Simply put, you are not going to be protected by the government, so the consumer must protect himself.”

Yes, Mr. Zanides, consumers need more than protection, they need these guys put out of business!

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