Not only are the authorities cracking down on fraudulent loan modification firms, but attorneys are beginning to file class action lawsuits against major violators. One loan modification company mentioned in the FOX report, The Firm, from Rancho Cucamonga, CA was recently forced to pay back advanced fees to a client for loan modification services. The Firm now has an advanced fee agreement with the Department of Real Estate.
However, a desist and refrain order was sent to The Firm on 11/14/2008 according to the California Department of Real Estate. One of the dangers I feel these advanced fee agreements pose to the public is that even with one of these agreements, brokers cannot accept advanced fees in all circumstances. For example, these advanced fee agreements do not allow real estate brokers or real estate sales people to accept advanced fees if the homeowner in distress they represent has had a notice of default filed against them.
The vast majority of clients in the foreclosure process are either past the point of a notice of default being filed against them or they are quickly approaching that point. If brokers are willing to accept advanced fees, with or without the DRE’s permission, it is evidence that they are either ignorant of the law or that they are willing to skirt around the law. Business people with no respect for the law should not be trusted to perform the services they promise to perform…period.
In the end, the real question consumers should be asking themselves is why they should use a real estate agent to renegotiate a legal contract in the first place. If advanced fee agreements allow real estate brokers to work with only a small percentage of homeowners that need a legitimate loan modification and if it costs the same to use an attorney why not use the attorney?
In my humble opinion, loans are nothing less than contracts. A Loan modification, then, is a renegotiation of an existing contract.
Negotiating changes to contracts is the purview of an attorney. Therefore, if it costs the same to hire a real estate broker or an attorney to renegotiate a contract, you should choose the expert…the attorney.
Attorneys are not subject to advanced fee requirements. Real estate brokers are. In an effort to earn money in a struggling economy, it is apparent that many brokers are skirting the law. If you want to pursue a loan modification please contact an attorney. Ask to consult with the attorney prior to paying any money and do your research on the law offices you speak with before paying them any of your hard earned money.
From Fox News LA:
With so many homeowners facing foreclosure, “loan modification” companies promising financial lifelines sound great. Watch out, though… some customers say they’re not getting they’re not getting their money’s worth after putting down big money up front.
The CEO of The Firm, Nick Ayyoub, claims the DRE only notified real estate brokers engaged in the loan modification business in late October, 2008 of the need to have their advance fee contracts approved by the agency (DRE); Ayyoub also claims his company has hundreds of satisfied customers.
Attorney Robert Starr, Woodland Hills, at (818) 225-9040 has asked court permission to file a class action lawsuit against The Firm, a loan modification company with offices in Rancho Cucamonga and Anaheim, claiming the company has violated the state’s advance fee contract law.
Arce Legal Services, Rancho Cucamonga, at (909) 489-0190 is in contact with several Inland Empire attorneys who are considering class action lawsuits against loan modification companies.
Attorney John Habashy, Beverly Hills, at (800) 825-1109 is also considering a class action lawsuit against loan modification firms.
Here are some resources to learn more about loan modification:The California Dept. of Real Estate phone numbers for consumer services: Sacramento (916) 227-0864 Los Angeles (213) 620-2072.
The California Dept. of Real Estate (DRE) website, www.dre.ca.gov/mlb_adv_fees_list.html , lists the loan modification firms that have received DRE approval to use advance fee contracts. However, the list does not identify when a specific firm received such approval.
Obtaining that information requires contacting the DRE. According to the DRE, it is a violation for a loan modification company to charge advance fees if it has not first received DRE approval of its contract.
Source: FOX News LA
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I have no idea which company is a scam and which isn’t, but it’s absurd and naive to proclaim that companies that charge upfront fees are fraudulent. I can only surmise you have never done any modifications then.
Tell me, just how to you propose that you get paid for your modification services after the client has received the modification offer from the bank?
Do you know that your ideal client is also the least able to pay you after services are rendered, and you have no recourse. You’re less likely to be repaid than a credit card company because at least that’s still useful to a client.
So unless you are willing to become a collection agency/modification company, you must charge upfront. Or you must look for people who can easily afford to pay after services are rendered, though they typically won’t qualify for hardship since they can easily pay their mortgage on time and your fees afterward. And that shows up in your success record.
So someone tell me how loan modification companies can charge after the fact and be guaranteed their fee? Someone figure this conundrum out and out business with triple overnight. Oh, and what type of sunk costs do these modification companies have that they can wait 3-6 months for payment of any kind? Most legit companies have processing costs (most use one of the high volume firms that process hundreds of modifications per month) and have legal fees (lawyers review the file and submit it to the lender) that have to paid up front. Do these other companies not have these costs? Do they offer money back guarantees and performance guarantees like we do (and I’m guessing any legit firm that requires up front fees)?
If someone can tell us how we can charge after service is rendered and still get paid (we can’t hold up the modification either), then I’m all ears.
–Greg
Being a Lawyer does not make you more capable of negotiating loan modification. It has truly amazed me being a Mortgage Professional over 13 years how we licensed Real Estate Professionals are not capable of negotiating reduced payments and terms for homeowners. Please be advised these are the same Professionals who could present contracts, calculate income and debt, collect financial statement and documentation, contact various Lenders, communicate with Sellers and Buyers. What a load of crap that Lawyers are the only capable and knowledgeable party to negotiate these now so legal binding contracts. Lawyers use their title to get into areas they see money. I have been messed over by so many so-called high power “I can get done” Attorneys in my day. Title do not make you capable it is knowledge of your Profession. I see it like this where the money is just like the Real Estate Brokers who need money so follows the Attorneys who need money. Get a good knowledgeable and reputable Loan Modification Company that can assist you; bottom line use good judgment when hiring anyone.
Does anyone know anything about this company that I have hired to help me with a mods???
Greg:
As to your comment that it’s absurd and naïve to claim that loan modification companies that charge up front fees are fraudulent I have this to say:
Tell that to the Attorney General of most every state in the nation that provides the same warning to consumers. Read the foreclosure consulting laws in each state that bar the vast majority of foreclosure consultant s from accepting advanced fees unless they are attorneys. These warnings and laws are designed to protect consumers from fraudulent foreclosure consultants.
Perhaps these warnings and laws make it harder for honest and competent loan modification companies to make money but that’s the lay of the land and everyone has a choice to either open a loan modification firm or not and a choice to work in one or not as well.
As to the conundrum you describe I have an answer for you and I hope you have already answered the conundrum yourself…if you are to accept advanced fees then you must be an attorney or your state laws must allow you to accept advanced fees. My post, Greg, was designed for the consumer to make wise choices about the firm they choose to help them. Honestly…I don’t really care about the conundrum that foreclosure consultants have when it comes to getting money from homeowners in distress.
I don’t think that attorneys are experts of calculating NPV or figuring out BPO or DTI ..I think it’s absurd to let an attorney do a Mod. it’s a 100% Loan officers business. the Mod is not purchase contract it’s debt restructure.
Caution is the word here. It’s not that loan modification companies are all fraudulent, it’s that in many cases they are breaking the law when they take up front fees from a consumer in default. If you do business with a company that is breaking the law, should you be surprised later when they turn out to be fraudulent?
– L. Young, ESQ
As with any industry there are good and bad apples. It is a shame that unscrupoulous modification companies are spoiling a legitimate niche for competent hard-working professionals… that are not lawyers.
I have mentored two attorney’s already in order to help them enter this field. My firm also does the back-end for an attorney at this point in time. The mere fact of being an attorney does not instantly make one a skilled and successful loan modifier.
I humbly submit that anyone with the correct experience in mortgage lending and real estate, contacts within lender loss mit departments (a strong plus), a stubborn and tenacious nature, a strong work ethic and high ethical standards will make an excellent advocate for homeowner clients that do not feel prepared or able to tackle the beauracratic monster’s.
Clearly the laws in each state must be obliged I just feel it is truly a shame to provide attorney’s unfair privliedge in this arena as being a lawyer provides no particular advantage in negotiating a loan modification. The impression created by such legislation promotes a falsehood and of course many attorney’s with no experience in real estate or mortgage lending are creating a false impression that they can adequately represent their client’s interests when, in fact, they have no clue how to proceed in obtaining more favorable mortgage terms for their clients.
Can you tell me if I qualify for loan modification
My loan is with wamu and is arm option 1 wich means I have negative every month this a trhee units owner occupied I am late all ready one month and I dont want to make any moore payments becouse the loan is bad loan with negarive each month
To Reinaldo. Help is available to those who are suffering a hardship. It would not hurt you to contact a company handling loan modifications to see if you qualify. It should not cost you anything to check. Just be careful to choose a legitimate company. Having looked into this myself, I believe you are safest with a company that utilizes Attorneys.
I think the way to fix this is having a mandatory special license that will require that the person applying for it has a previous license, either Real Estate, Mortgage etc, perhaps with a mandatory surety bond, if at the same time they create laws just like the laws that even send you to jail for working without a license, I bet there will be few people that will take a chance of going to jail, that way everyone who is legally license and knows what he/she is doing, will be accountable for their actions and the customers will be protected. As we all know it is imposible that the few lawyers that are working in this business can handle tha volume and we all know there is more to come. I am in South Florida and this problem is just getting out of hand.
I know a couple of Immigration Lawyers that just became Loan Modification Expert. You figure 9 million to 15 million Mods multiply that by $4,00o to $7000 fee that’s a lot of money. I guess just ask the lawyer what he use to practice before he became a Loan Mod expert.
The Loan Mods should be done by a real estate broker period. It is quite simple in California the upfront money goes into a trust. After services are rendered then they get paid. 25% for consultation, 75% when loan mod is complete. I believe it should be 25% initial consultation, 25 loan preparation 50% when loan is complete. I am sorry people an attorney doing a loan mod is an attorney who can’t find any other work. We are the people who talk to the banks. We are the people who are going to get them a short-sale if the loan mod gets rejected. If you want a loan mod use a reliable broker. P.S Reginaldo if you can’t afford your neg am you can’t afford a loan mod, if an attorney says you can well you just lost your retainer fee. Benny
I paid $6300.00 to Green Credit Solutions and they accomplished nothing in four months and now they only want to give me $2000.00 out of all that money I gave them. I would say DONT TRUST any of them and call the banks yourself
Hi Jessica, I recommend that you contact an attorney if the company will not give you a refund.
You may also want to file a complaint with the California Department of Real Estate, Department of Corporations and California Bar. Also, don’t forget the BBB.
It sounds like you either also signed up for a debt settlement plan or have multiple liens.
Again, take your contract to an attorney if you have to in order to get assistance in obtaining a refund if they won’t help you.