Loan Modification Scam Alert

You may not know it, but I'm a proud whistle blower.   My first press release was called, Dirty Tricks Your Bankers Don't Want You To Know About, and it got me the cover of the Wall Street Journal. It was mainly about negative amortization loans (AKA: Neg Am or Option Arms).

The point of the press release was to make the public aware that these mortgage products were being sold under false pretense, meaning the majority of brokers and bankers who were selling them were selling them to the wrong type of borrowers...on purpose. 

Note: NegAms have their uses, but they are an advanced product, completely unsuitable for the average home buyer, yet they were being sold to first time home buyers or home owners who were drowning in debt.

How did I know?  My bank sold loans both wholesale an retail. I often worked with mortgage companies to help them close loans with my bank.  I would listen to the loan officers on the phone and see the files they submitted. It was plain to me they didn't care about the lives they were ruining as long as they made their sale. It made me sick.

When the market collapsed, these guys went for a number of months without making money.  No one wanted their garbage loans.  Then the inevitable happened.  They discovered loan modifications.

A loan modification is a procedure in which the lender agrees to change the terms of the loan in order to help a borrower who has experienced a hardship.

The key word here is HARDSHIP.

In other words, if you lost your job due to the changes in the economy, or you had a medical emergency, etc. 

It doesn't apply to people who simply want lower payments or are just bad with money.

That didn't stop the new wave of scammers who needed to make some fast money.  Shops opened up everywhere almost overnight.  Hiding behind the guise of, "Get your share of the bailout!", these guys promise you that you'll qualify for a lower payment, reduced principal balance, and more.

They work with law firms, so that they can charge you up to $2500 up front for their services. Most even offer a money back guarantee.

Here's the scoop. 

The telemarketers, which for the most part are the same guys who sold you your mortgage which you shouldn't have qualified for in the first place, are trained to say just about everything and anything you want to hear to get the $2500 out of you.  They then split the fee with the law firm. 

The law firms hire a number of paralegals to file the paper work for them.  The big picture is they know they're getting paid regardless of whether they get your loan modification approved or not.  Their guarantee is almost impossible to enforce.  I'll show you.

The paralegals don't know a thing about RESPA or any of the laws which protect you and make the loan modifications possible.  The lawyers know that the lenders will make some form of pathetic counter offer, though it will be no where near what they promised you or that you really qualify for, which they'll then carry to you.  If you don't accept, too bad.  Your money is gone.

You could get the same results yourself if that's all they're going to do.

I have spoken with a number of guys that work at these shops. They tell me less than 2% of their clients get the deal they were promised. The truly sad thing is that even these guys feel like they're robbing good people of their last few dollars.

You know you're at the bottom of the barrel when your hired guns start having a conscious.

There are professionals that do loan modifications legitimately.  They negotiate aggressively with your lenders to get you the lowest possible payment (never taking the BS low ball offer your lender automatically generates without even researching your file), reduce your balances (in some instances), and don't charge $2500 up front, but only charge after they've successfully negotiated your loan modification as promised.

I would say the difference between what they do and what these chop shops do is similar to the difference between what we do at Score More Credit and what other companies in my industry do to repair your credit.

Your thoughts?

Comments

[Tony Jordan]

What are some of the loan modification companies that do NOT charge up front costs on loan modifications for customers? I am a bank loan officer for 18 years with no fraudulent background. I have an attorney based loan mod company I work with, led by an attorney I have known for years and trust. He charges upfront with a money-back guarantee. His pre-qual process is very particular; most consumers with bank-negotiated loan mods are back in trouble - which is a file the attorney usually cannot help at that point...

Where do you find these "true" loan mod companies?

[Harry Novak]

I gave American Mitigation Group $2534 back in January to modify a mortgage loan. They were not successful & did not return my money as promised. They are a national company running a scam. They need to be exposed, investigated & shut down. Any suggestions on how to do it?

They are based in Del Mar, Calif & recently filed to be a national law firm in all 50 states. Prior to this it was illegal for them to accept advance fee for their service.
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I'd report them to the FTC, BBB, and hire yourself an attorney, but only after giving them the opportunity to refund your money.

-Brian

[lucas law center]

Thanks for the info, I'm happy that i saw your blog here about Loan Modification Scam Alert.

LLC