Press Release
July 28, 2009
WASHINGTON – As part of an ongoing effort to expand relief to struggling homeowners, Treasury released today the Supplemental Directive for its Home Price Decline Protection (HPDP) program, a component of the Home Affordable Modification Program (HAMP). HPDP provides additional incentive payments for modifications on properties located in areas where home prices have recently declined. The purpose of the program is to encourage additional lender participation and HAMP modifications in areas with recent price declines by helping to offset any incremental collateral loss on modifications that do not succeed. HPDP will help ensure that borrowers in areas with recent home price declines have the opportunity to stay in their homes, thereby minimizing foreclosures, which further depress home values.
“This is an important next step in our multi-faceted efforts to bring relief to struggling homeowners and stabilize the housing market,” said Assistant Secretary for Financial Institutions Michael Barr. “Home price decline protection can help homeowners who may not have been reached otherwise.”
All HAMP loan modifications begun after September 1st, 2009 are eligible for HPDP payments.
HAMP offers incentives to investors/lenders, servicers, and homeowners for successful mortgage modifications. The “pay-for-success” structure of HAMP provides incentives to create sustainable mortgage modifications in a manner most cost effective for taxpayers.
Treasury has allocated a total of up to $10 billion for the HPDP program, but the actual amount spent will depend on the home price trends. The funds available to individual servicers to pay HPDP and all other incentives on HAMP modifications will be capped according to the Program Participation Cap included in their Servicer Participation Agreement. Treasury will establish each servicer’s initial cap by estimating the number of modifications that servicer is expected to perform during the term of HAMP.
The Home Affordable Modification Program (HAMP) commits $75 billion dollars, including $50 billion of funds from the Troubled Asset Relief Program, to encourage loan modifications that will provide sustainably affordable mortgage payments for borrowers.
HAMP is one component of Making Home Affordable, the Administration’s comprehensive plan to stabilize the US housing market and offer assistance to millions of homeowners by reducing mortgage payments and preventing avoidable foreclosures. Making Home affordable includes: (1) the $75 billion HAMP program, (2) the Home Affordable Refinancing Program providing increased refinancing opportunities for borrowers with high loan-to-value ratios and (3) a $200 billion commitment to increase confidence in the GSEs and support increased refinancing generally.
Thursday, August 6, 2009
Wednesday, August 5, 2009
From the Trenches - Credit Consequences of Foreclosures & Short Sales
The other day, I was contacted by a couple who wanted to purchase a home. The husband has a secure, long-term job with a substantial income. The husband received a promotion, but it required that he sell his home (which was held only in his name) and move. Because he was "underwater" on his loan (i.e. owed more than the house was now worth) he decided to do a short-sale.
Prior to the short-sale, the husband's credit score was well over 800. After the sale, it dropped about 50 points, still an excellent score. His wife's credit score remained over 800. With his secure, high-income job, great credit score, and almost 50% down payment, he thought they would be able to buy a new home.
He thought wrong. In trying to investigate this issue, I came across Fannie Mae guidelines which state that borrowers must wait four years after a short-sale, bankruptcy, or foreclosure before they can qualify for a new home loan. If they can prove hardship, then this waiting period may be reduced to two years.
Has anyone recently been through a short-sale, foreclosure or bankruptcy and then borrowed money to purchase a home? If so, I would appreciate hearing about your experiences. It could help a lot of people who may be trying to decide if one of these options makes sense for them.
Prior to the short-sale, the husband's credit score was well over 800. After the sale, it dropped about 50 points, still an excellent score. His wife's credit score remained over 800. With his secure, high-income job, great credit score, and almost 50% down payment, he thought they would be able to buy a new home.
He thought wrong. In trying to investigate this issue, I came across Fannie Mae guidelines which state that borrowers must wait four years after a short-sale, bankruptcy, or foreclosure before they can qualify for a new home loan. If they can prove hardship, then this waiting period may be reduced to two years.
Has anyone recently been through a short-sale, foreclosure or bankruptcy and then borrowed money to purchase a home? If so, I would appreciate hearing about your experiences. It could help a lot of people who may be trying to decide if one of these options makes sense for them.
Tuesday, July 28, 2009
From the Trenches - A Letter to the President & CEO of Bank of America
July 28, 2009
Kenneth Lewis
President and CEO
Bank of America
ken.d.lewis@bankofamerica.com
cc: Timothy F. Geithner
Secretary of the Treasury
United States
timothy.geithner@do.treas.gov
Mr. Lewis:
I am sure you are aware of the myriad of complaints lodged against banks regarding the short-sale process. As someone who has run residential lending divisions of banks and savings and loans, been involved in the closure of lending institutions in the 1980’s, and has held a California real estate broker’s license for 25 years, I am very familiar with and sympathetic towards the lending problems Bank of America inherited from Country Wide. But I wanted to relate to you my most recent experience in an attempt to help you understand why your institution’s short sale program is inefficient.
I listed a home as a short sale in March, 2009. Because this is a condominium, setting a fair market value was not too difficult. In this same complex, there is an identical unit that has gone into foreclosure. I listed our subject property $9,000 above this foreclosure.
Careful to submit all required documents, I had the bank’s approval to move forward with the sale within a month. In May, the seller declared bankruptcy, but in June I received permission, both from the Bank as well as the seller’s attorney, to move forward with the short-sale.
In the middle of June, I submitted an offer to your short-sale department. The offer was at full list price. On July 24 I called to get a status update. I was told the buyer’s offer was rejected. I requested an explanation as to what was wrong with the offer as presented; no explanation was given. I requested a counter-offer; I was told no counter-offer would be supplied. I was simply told to submit a new offer, and the review process would begin again.
Mr. Lewis, I cannot understand how your short-sale department can claim to want to sell this home, yet respond in this manner. This listing is now unsalable. If I raise the list price, I will be so far above market value that, even if another offer comes in, it will not appraise. I can only assume that the bank wishes to foreclose.
Please let me know if the Bank, in fact, prefers to allow the home to go into foreclosure. If that is the case, then I will return the listing to the seller.
Thank for your consideration,
Ida Abelson
Broker
Brickyard Realty
Kenneth Lewis
President and CEO
Bank of America
ken.d.lewis@bankofamerica.com
cc: Timothy F. Geithner
Secretary of the Treasury
United States
timothy.geithner@do.treas.gov
Mr. Lewis:
I am sure you are aware of the myriad of complaints lodged against banks regarding the short-sale process. As someone who has run residential lending divisions of banks and savings and loans, been involved in the closure of lending institutions in the 1980’s, and has held a California real estate broker’s license for 25 years, I am very familiar with and sympathetic towards the lending problems Bank of America inherited from Country Wide. But I wanted to relate to you my most recent experience in an attempt to help you understand why your institution’s short sale program is inefficient.
I listed a home as a short sale in March, 2009. Because this is a condominium, setting a fair market value was not too difficult. In this same complex, there is an identical unit that has gone into foreclosure. I listed our subject property $9,000 above this foreclosure.
Careful to submit all required documents, I had the bank’s approval to move forward with the sale within a month. In May, the seller declared bankruptcy, but in June I received permission, both from the Bank as well as the seller’s attorney, to move forward with the short-sale.
In the middle of June, I submitted an offer to your short-sale department. The offer was at full list price. On July 24 I called to get a status update. I was told the buyer’s offer was rejected. I requested an explanation as to what was wrong with the offer as presented; no explanation was given. I requested a counter-offer; I was told no counter-offer would be supplied. I was simply told to submit a new offer, and the review process would begin again.
Mr. Lewis, I cannot understand how your short-sale department can claim to want to sell this home, yet respond in this manner. This listing is now unsalable. If I raise the list price, I will be so far above market value that, even if another offer comes in, it will not appraise. I can only assume that the bank wishes to foreclose.
Please let me know if the Bank, in fact, prefers to allow the home to go into foreclosure. If that is the case, then I will return the listing to the seller.
Thank for your consideration,
Ida Abelson
Broker
Brickyard Realty
Friday, July 24, 2009
Countrywide Offers Assistance to Former Customers
Bank of America, which acquired Countrywide Financial Corp., one of the most active of the subprime lenders, has begun issuing checks to its borrowers who are eligible for foreclosure assistance under an agreement with attorneys general in 40 states.
Borrowers most likely to be eligible for assistance must have experienced a foreclosure, short sale, or deed-in-lieu of foreclosure after taking out a Countrywide mortgage. Rust Consulting, a third-party administrator, is managing the program, and notifying and paying eligible customers.
Source: Reuters News, Steve Eder (07/23/2009)
Borrowers most likely to be eligible for assistance must have experienced a foreclosure, short sale, or deed-in-lieu of foreclosure after taking out a Countrywide mortgage. Rust Consulting, a third-party administrator, is managing the program, and notifying and paying eligible customers.
Source: Reuters News, Steve Eder (07/23/2009)
Friday, July 17, 2009
"Operation Loan Lies"
Federal and State Agencies Target Mortgage Foreclosure Rescue and Loan Modification Scams
FTC Leads “Operation Loan Lies” to Stop Fraud and Help Distressed Homeowners
Federal Trade Commission Chairman Jon Leibowitz, joined by California Attorney General Jerry Brown, today announced Operation Loan Lies, a coordinated national law enforcement effort to crack down on mortgage modification scams. The operation involves 189 actions by 25 federal and state agencies against defendants who deceptively marketed foreclosure rescue and mortgage modification services. The FTC actions, which affect consumers throughout the nation, are being announced in southern California, where the scams originated.
“These con artists see the high foreclosure rates as an opportunity to prey on people in distress,” FTC Chairman Jon Leibowitz said. “They promise to rescue homeowners in troubled financial waters, but after they take their money they throw them an anchor instead of a lifeline. People facing foreclosure should avoid any company or individual that requires a fee in advance, guarantees to stop a foreclosure or modify a loan, or advises the homeowner to stop paying the mortgage company.”
The FTC announced four lawsuits, bringing to 14 the number of mortgage foreclosure rescue and loan modification scam cases the Commission has brought since April. Twenty-three state attorneys general and other agencies are participating in the operation, taking action against 178 companies engaged in these types of deception. The FTC also announced a settlement in a lawsuit filed last November.
The FTC charged that the defendants falsely claimed that they would either obtain a mortgage loan modification or stop foreclosure, or both, and that some of the defendants falsely represented that they would give consumers refunds if they failed to do so. After charging consumers the equivalent of one month’s mortgage payment or more in advance, these companies often did little or nothing to help homeowners renegotiate their mortgages or stop foreclosure. After failing to provide the promised services, the defendants that promised refunds did not honor those promises. In each case the FTC is asking the court for consumer redress and a permanent bar on the deceptive practices. The FTC would like to thank the Financial Crimes Enforcement Network (FinCEN) of the Department of the Treasury and the Special Inspector General of the Troubled Asset Relief Program (SIG-TARP) for their invaluable assistance in these cases.
FTC Leads “Operation Loan Lies” to Stop Fraud and Help Distressed Homeowners
Federal Trade Commission Chairman Jon Leibowitz, joined by California Attorney General Jerry Brown, today announced Operation Loan Lies, a coordinated national law enforcement effort to crack down on mortgage modification scams. The operation involves 189 actions by 25 federal and state agencies against defendants who deceptively marketed foreclosure rescue and mortgage modification services. The FTC actions, which affect consumers throughout the nation, are being announced in southern California, where the scams originated.
“These con artists see the high foreclosure rates as an opportunity to prey on people in distress,” FTC Chairman Jon Leibowitz said. “They promise to rescue homeowners in troubled financial waters, but after they take their money they throw them an anchor instead of a lifeline. People facing foreclosure should avoid any company or individual that requires a fee in advance, guarantees to stop a foreclosure or modify a loan, or advises the homeowner to stop paying the mortgage company.”
The FTC announced four lawsuits, bringing to 14 the number of mortgage foreclosure rescue and loan modification scam cases the Commission has brought since April. Twenty-three state attorneys general and other agencies are participating in the operation, taking action against 178 companies engaged in these types of deception. The FTC also announced a settlement in a lawsuit filed last November.
The FTC charged that the defendants falsely claimed that they would either obtain a mortgage loan modification or stop foreclosure, or both, and that some of the defendants falsely represented that they would give consumers refunds if they failed to do so. After charging consumers the equivalent of one month’s mortgage payment or more in advance, these companies often did little or nothing to help homeowners renegotiate their mortgages or stop foreclosure. After failing to provide the promised services, the defendants that promised refunds did not honor those promises. In each case the FTC is asking the court for consumer redress and a permanent bar on the deceptive practices. The FTC would like to thank the Financial Crimes Enforcement Network (FinCEN) of the Department of the Treasury and the Special Inspector General of the Troubled Asset Relief Program (SIG-TARP) for their invaluable assistance in these cases.
Thursday, July 16, 2009
CA State Attorney General Requires Foreclosure Consultants to Register & Post $100,000 Bond
Continuing his fight against scam artists who "prey on" vulnerable Californians, Attorney General Edmund G. Brown Jr. issued a directive forcing foreclosure consultants to register with his office and post a $100,000 bond by July 1, 2009.
Those who fail to do so will be in violation of state law, subject to criminal penalties of up to a year in jail and fines ranging from $1,000 to $25,000 per violation.
"California is awash with con artists who prey on vulnerable families facing foreclosure," Brown said. "By forcing foreclosure consultants to submit detailed information to my office and post a $100,000 bond, this registry will help bring long-overdue transparency to this shadowy world."
Up and down the state, scam artists pose as legitimate foreclosure consultants, promising homeowners they will prevent foreclosure. In reality, these scam artists charge huge up-front costs, but don't provide an ounce of help.
Earlier this month, Brown's office prosecuted a scam artist who provided hundreds of homeowners with forged bank documents and directed them to send their mortgage payments to accounts she had created, instead of the homeowners' lender.
Additionally, Brown's office has seen a significant increase in the number of complaints from homeowners regarding foreclosure consultants.
The registry unveiled today will provide Californians with information about potential consultants and recourse in the event that a consultant violates the law.
All foreclosure consultants operating in California must post a $100,000 bond and register with Brown's office by July 1, 2009 and submit the following information:
- Name, address, and telephone number;
- All names, addresses, telephone numbers, websites, and e-mail addresses used or proposed to be used in connection with their business;
- Copies of all advertising;
- Copies of each different contract the consultant will use with consumers; and
- A copy of its $100,000 bond.
Foreclosure consultants who provide proper information will receive a Certificate of Registration. Brown's office, however, may refuse to issue, or revoke, a Certificate of Registration if the foreclosure consultant has made any misstatement in its registration form, has been convicted of fraud or misrepresentation, has been convicted of a violation of the state's foreclosure consultant laws, California's false advertising, unfair or deceptive practices laws or other laws dealing with mortgages.
If the company violates the law, a court may order restitution to victims out of proceeds from the $100,000 bond.
In order to obtain a Certificate of Registration by July 1, 2009, foreclosure consultants should send in their registration application and materials as soon as possible so they can be reviewed prior to July 1.
The registry was established through legislation sponsored by Speaker of the Assembly Karen Bass, AB 180, which was signed into law last year.
A copy of the registration forms may be found at http://ag.ca.gov/register.php under the "Foreclosure Consultant Registry."
After July 1, 2009, consumers can call the Attorney General's office to determine whether the company they are considering dealing with has been issued a Certificate of Registration.
Tips for Homeowners
DON'T pay money to people who promise to work with your lender to modify your loan. It is unlawful for foreclosure consultants to collect money before (1) they give you a written contract describing the services they promise to provide and (2) they actually perform all the services described in the contract, such as negotiating new monthly payments or a new mortgage loan. However, an advance fee may be charged by an attorney, or by a real estate broker who has submitted the advance fee agreement to the Department of Real Estate, for review.
DO call your lender yourself. Your lender wants to hear from you, and will likely be much more willing to work directly with you than with a foreclosure consultant.
DON'T ignore letters from your lender. Consider contacting your lender yourself, many lenders are willing to work with homeowners who are behind on their payments.
DON'T transfer title or sell your house to a "foreclosure rescuer." Fraudulent foreclosure consultants often promise that if homeowners transfer title, they may stay in the home as renters and buy their home back later. The foreclosure consultants claim that transfer is necessary so that someone with a better credit rating can obtain a new loan to prevent foreclosure. BEWARE! This is a common scheme so-called "rescuers" use to evict homeowners and steal all or most of the home's equity.
DON'T pay your mortgage payments to someone other than your lender or loan servicer, even if he or she promises to pass the payment on. Fraudulent foreclosure consultants often keep the money for themselves.
DON'T sign any documents without reading them first. Many homeowners think that they are signing documents for a new loan to pay off the mortgage they are behind on. Later, they discover that they actually transferred ownership to the "rescuer."
DO contact housing counselors approved by the U.S. Department of Housing and Urban Development (HUD), who may be able to help you for free. For a referral to a housing counselor near you, contact HUD at 1-800-569-4287 (TTY: 1-800-877-8339) or www.hud.gov.
Those who fail to do so will be in violation of state law, subject to criminal penalties of up to a year in jail and fines ranging from $1,000 to $25,000 per violation.
"California is awash with con artists who prey on vulnerable families facing foreclosure," Brown said. "By forcing foreclosure consultants to submit detailed information to my office and post a $100,000 bond, this registry will help bring long-overdue transparency to this shadowy world."
Up and down the state, scam artists pose as legitimate foreclosure consultants, promising homeowners they will prevent foreclosure. In reality, these scam artists charge huge up-front costs, but don't provide an ounce of help.
Earlier this month, Brown's office prosecuted a scam artist who provided hundreds of homeowners with forged bank documents and directed them to send their mortgage payments to accounts she had created, instead of the homeowners' lender.
Additionally, Brown's office has seen a significant increase in the number of complaints from homeowners regarding foreclosure consultants.
The registry unveiled today will provide Californians with information about potential consultants and recourse in the event that a consultant violates the law.
All foreclosure consultants operating in California must post a $100,000 bond and register with Brown's office by July 1, 2009 and submit the following information:
- Name, address, and telephone number;
- All names, addresses, telephone numbers, websites, and e-mail addresses used or proposed to be used in connection with their business;
- Copies of all advertising;
- Copies of each different contract the consultant will use with consumers; and
- A copy of its $100,000 bond.
Foreclosure consultants who provide proper information will receive a Certificate of Registration. Brown's office, however, may refuse to issue, or revoke, a Certificate of Registration if the foreclosure consultant has made any misstatement in its registration form, has been convicted of fraud or misrepresentation, has been convicted of a violation of the state's foreclosure consultant laws, California's false advertising, unfair or deceptive practices laws or other laws dealing with mortgages.
If the company violates the law, a court may order restitution to victims out of proceeds from the $100,000 bond.
In order to obtain a Certificate of Registration by July 1, 2009, foreclosure consultants should send in their registration application and materials as soon as possible so they can be reviewed prior to July 1.
The registry was established through legislation sponsored by Speaker of the Assembly Karen Bass, AB 180, which was signed into law last year.
A copy of the registration forms may be found at http://ag.ca.gov/register.php under the "Foreclosure Consultant Registry."
After July 1, 2009, consumers can call the Attorney General's office to determine whether the company they are considering dealing with has been issued a Certificate of Registration.
Tips for Homeowners
DON'T pay money to people who promise to work with your lender to modify your loan. It is unlawful for foreclosure consultants to collect money before (1) they give you a written contract describing the services they promise to provide and (2) they actually perform all the services described in the contract, such as negotiating new monthly payments or a new mortgage loan. However, an advance fee may be charged by an attorney, or by a real estate broker who has submitted the advance fee agreement to the Department of Real Estate, for review.
DO call your lender yourself. Your lender wants to hear from you, and will likely be much more willing to work directly with you than with a foreclosure consultant.
DON'T ignore letters from your lender. Consider contacting your lender yourself, many lenders are willing to work with homeowners who are behind on their payments.
DON'T transfer title or sell your house to a "foreclosure rescuer." Fraudulent foreclosure consultants often promise that if homeowners transfer title, they may stay in the home as renters and buy their home back later. The foreclosure consultants claim that transfer is necessary so that someone with a better credit rating can obtain a new loan to prevent foreclosure. BEWARE! This is a common scheme so-called "rescuers" use to evict homeowners and steal all or most of the home's equity.
DON'T pay your mortgage payments to someone other than your lender or loan servicer, even if he or she promises to pass the payment on. Fraudulent foreclosure consultants often keep the money for themselves.
DON'T sign any documents without reading them first. Many homeowners think that they are signing documents for a new loan to pay off the mortgage they are behind on. Later, they discover that they actually transferred ownership to the "rescuer."
DO contact housing counselors approved by the U.S. Department of Housing and Urban Development (HUD), who may be able to help you for free. For a referral to a housing counselor near you, contact HUD at 1-800-569-4287 (TTY: 1-800-877-8339) or www.hud.gov.
Tuesday, July 7, 2009
Why Lenders Don't Want to Modify Loans
The Federal Reserve Bank of Boston just published an abstract ominously entitled Why Don’t Lenders Renegotiate More Home Mortgages? Redefaults, Self-Cures, and Securitization. As frightening as the title is, the results are worse.
The authors analyzed 665,410 loans originated between 2005 and 2007 that were over 60 days delinquent. Here are the results:
3% received modifications that resulted in lower monthly payments;
5.5% received modifications, but these did not result in lower monthly payments;
30% were able to fix their delinquency issues without any help from the lenders; and
45% of the approximately 150,000 borrowers who received some kind of aid ended up in arrears again.
The bottom line, according to Boston Fed senior economist Paul S. Willen, is that “loan modification is not profitable for lenders....A lot of people you give assistance to would default either way or won’t default either way. They (the banks) are trying to maximize profits, and at this point maximizing profits does not mean modifying loans.’’
So what's the solution? According to Willen, the feds should give the money directly to the borrower. “You have more money going to the banks and the servicers than you do to the homeowners,’’ he said. “It would make more sense to just give money to the borrowers.’’
The authors analyzed 665,410 loans originated between 2005 and 2007 that were over 60 days delinquent. Here are the results:
3% received modifications that resulted in lower monthly payments;
5.5% received modifications, but these did not result in lower monthly payments;
30% were able to fix their delinquency issues without any help from the lenders; and
45% of the approximately 150,000 borrowers who received some kind of aid ended up in arrears again.
The bottom line, according to Boston Fed senior economist Paul S. Willen, is that “loan modification is not profitable for lenders....A lot of people you give assistance to would default either way or won’t default either way. They (the banks) are trying to maximize profits, and at this point maximizing profits does not mean modifying loans.’’
So what's the solution? According to Willen, the feds should give the money directly to the borrower. “You have more money going to the banks and the servicers than you do to the homeowners,’’ he said. “It would make more sense to just give money to the borrowers.’’
Wednesday, July 1, 2009
Major Change in Government's Foreclosure Prevention Plan
In February, President Obama announced the Home Affordability Program. Under this program, borrowers with loans owned or guaranteed by Fannie Mae or Freddie Mac who had loan-to-value ratios of 80% to 105% and were not delinquent on their loan payments, could refinance at lower rates without buying mortgage insurance, or paying for more insurance than they already had.
Effective today, that top limit has been increased to 125%. This change is an acknowledgment that at least one in five homeowners now has negative equity in their homes. It also is intended to stimulate the home refinance market which has seen a slow-down in the past few weeks as interest rates creep over 5.5%
Effective today, that top limit has been increased to 125%. This change is an acknowledgment that at least one in five homeowners now has negative equity in their homes. It also is intended to stimulate the home refinance market which has seen a slow-down in the past few weeks as interest rates creep over 5.5%
Monday, June 29, 2009
From the Trenches
Want to know what it's like to be a Realtor these days? Take a look at this New York Times article:
http://www.nytimes.com/2009/06/29/business/29loanmod.html?em
http://www.nytimes.com/2009/06/29/business/29loanmod.html?em
Wednesday, June 24, 2009
Fraud Alert - Loan Scams
California Department of Real Estate ** CONSUMER ALERT ** (Issued 3/2009) 1 FRAUD WARNINGS FOR CALIFORNIA HOMEOWNERS IN FINANCIAL DISTRESS
I. HOME LOAN MODIFICATIONS.
Because of the current economic situation, you may not be able to afford your mortgage payment. If you are also not able to refinance your home loan, an option that may be available to you is a Loan Modification.
What is a Loan Modification? That is where you and your lender agree to modify one or more of the terms of your home loan. The terms could be a lower interest rate, an extension of the length of the loan (like making a 30 year loan into a 40 year loan), a conversion of an adjustable rate loan (called an ARM) to a fixed rate, the deferring of some of your payments, or any other modification of loan terms.
The goal of a Loan Modification is to help you keep your home and to give you a real, meaningful, sustainable, and long-term adjustment to your current home loan that works for your financial situation.
II. BEWARE OF LOAN MODIFICATION SCAMS AND CON ARTISTS, WHO USUALLY DEMAND THE PAYMENT OF UPFRONT FEES.
Just like after a hurricane hits, where unscrupulous contractors and repair people may collect money for repairs and then not do anything, there are numerous rogue and dishonest operators and companies (many of whom are unlicensed) that have appeared in the wake of the current economic downturn -- and more are popping up every day. They make false promises about their abilities to help get you a loan modification, collect money up front, and then do nothing or next to nothing. They are predators who take advantage of those who are or may be vulnerable.
III. THINGS TO DO TO PROTECT YOURSELF FROM BECOMING A LOAN MODIFICATION OR FORECLOSURE RESCUE SCAM VICTIM.
A. Do It Yourself (and Do It As Soon As Possible) -- You can contact your mortgage servicer and/or lender directly and request a Loan Modification that works for you and your lender. Don’t wait to call if you cannot make or believe you will not be able to make your mortgage payments. Be persistent! - call back many times. Make detailed notes about your attempts to call, when you have left messages, who you speak with, what was said, and what offers are discussed and/or made.
B. Other Free and Safe Options -- If you don’t believe you can negotiate a Loan Modification yourself, or if you do not want to, there are free and safe options available to you.
1. The U.S. Department of Housing and Urban Development ("HUD") offers Foreclosure Avoidance Counseling through non-profit agencies in California. Go to HUD’s web site at www.hud.gov, or call 800-569-4287, to find counselors. HUD also offers information to homeowners facing the loss of their home.
2. HOPE NOW Alliance - this is a cooperative effort of home loan counselors and lenders, and it consists of HUD intermediaries. Go to the HOPE NOW web site at www.hopenow.com or call 888-995-HOPE.
C. Locate and Work with a Legitimate, Licensed, and Qualified person or company ("Log on, Look em up, and Check em out")
1. California licensed real estate brokers can perform loan modification work, and licensed real estate salespersons can do such work under the supervision of their employing broker.
While it is legal for a real estate broker to charge you in advance of performing the loan modification services before a Notice of Default is recorded, you do not have to pay anything in advance of a successful loan modification, and all broker fees are negotiable. If a real estate broker wishes to charge an advance fee, he or she must submit an Advance Fee Agreement and all supporting materials to the Department of Real Estate ("DRE"). If the agreement and materials meet the requirements under the law, DRE issues a no-objection letter. All fees collected in advance must be properly handled as trust funds, which require special handling and must be deposited into the broker’s trust account. A licensee must refund to you any unearned portion of the advance fee(s) collected if any of the promised services are not completed.
But please understand that a no-objection letter does not mean that DRE recommends, approves or endorses the agreement or the services of the real estate licensee. You should go to DRE’s web site at www.dre.ca.gov, review and check the information on advance fees and loan modification services, carefully review the public license information on the real estate broker (that information will include any disciplinary history), and look for any Desist and Refrain Orders (D&Rs) that have been issued against companies and individuals. If a D&R has been issued, that means that DRE has determined the individual and/or company is unlicensed and/or has operated unlawfully.
2. California licensed lawyers can also perform loan modification work, but only when such lawyers render those loan modification services in the course and scope of their practice as an attorney at law.
Lawyers can also charge fees in advance (typically called a retainer), and even after a Notice of Default has been recorded. But lawyers must have a written fee agreement with you. And as is the case with real estate licensees, you do not have to pay anything in advance of a successful loan modification, and all legal fees are negotiable. Any fees that you pay to the lawyer(s) in advance do not have to be placed in their trust accounts.
Just as you should do with real estate licensees, check out lawyers by going to the website of the California State Bar, www.calbar.ca.gov. Check the lawyer‘s bar membership records and look for any discipline.
Unfortunately, some loan modification business models have claimed lawyer involvement but they are just unlawful schemes to avoid the prohibition against the collection of advance fees by a real estate licensee after a Notice of Default is recorded. In others, lawyers are just a "front" or non-participating "magnet" for business from desperate homeowners.
****Be on Guard and Check Them Out -- Do Your Own Homework**** In addition to looking at the license records, contact the Better Business Bureau to see if they have received any complaints about the person or company. But please understand that this is just another resource for you to check, and the loan modification provider might be so new that the Better Business Bureau may have little or nothing on them (or something positive because of insufficient public input).
Also, and very importantly, ask the loan modification "specialists" (whether they are real estate licensees or lawyers) about their financial, mortgage and real estate experience, the options and methods they use to renegotiate home loans, when they were first licensed, whether their license is still active, whether they have ever been disciplined, where they got their experience, and also ask them to define a loan modification and the process that they will undertake and the time that they will spend to negotiate a long-term, affordable and sustainable modification for you.
D. Signals of Fraud/Red Flags to Watch Out For
1. Demand for payment up front (advance fee payment). While not unlawful if paid to licensed persons in the certain limited situations discussed above, the demand or request for advance payment should alert you to the possibility of fraud.
2. Promises or guarantees of success, such as "We Can Save Your Home. We Have Saved Thousands. Free Consultation. Money Back Guarantee". No such guarantees are possible, and there are no assurances of a successful loan modification.
3. Too good to be true testimonials, such as "We Modified Terri G’s Adjustable Rate Loan, Which Had Spiked to 8 Percent, to a 3.5 Percent Fixed Rate Loan".
4. Claims that a loan modification company is attorney-backed, attorney-affiliated, or attorney-based -- especially where no lawyer or law firm is identified or mentioned. Many of these entities are simply using the name of an attorney (the name might be for show only, and/or there might not even be a lawyer involved) and scams skirting the law.
5. Claims that a loan modifier is operating under a California Finance Lender‘s (CFL) license issued by the California Department of Corporations. This is not lawful according to the Commissioner of the Department of Corporations.
6. A request that you grant a "power of attorney" to the loan modifier. The scammer may use the power of attorney to sell the home right out from under you.
7. A request that you transfer title to your home to the loan modifier or some third party. This is likely evidence of a scam where these scam artists will strip all of the remaining equity in your home.
8. Promises that you can repair your credit history by the payment of rent to the loan modifier or some third party.
9. Lease/rent-back scams, where you are told to transfer title to a third party, rent the home from that party, and then buy it back later. Transferring your deed gives the con artists the ability to evict you and sell the home.
10. Instructions to pay someone or some company other than your home loan lender or servicer.
11. Claims that a loan modification company will file a bankruptcy or other frivolous case for you to "force" a lender to negotiate a loan modification. So-called "forensic loan reviews" may fall into this category.
12. Assertions by the so-called loan modifier that you should just sign documents that they have filled out, without reviewing them first. You must carefully read and understand all of the documents you sign. Be especially wary of promises by salespeople that they will "take care of everything" and you just need to sign "a bunch of forms with boring legalese".
13. Lawyers or real estate licensees who tell you that they have no time to meet with you face-to-face.
14. Unlicensed people or companies.
15. Instructions from a loan modification provider that you should not contact your home loan lender or servicer, a lawyer, an accountant, or a non-profit housing counselor.
16. Being advised to miss payments in order to improve your chances of getting a loan modification.
17. High-pressure sales tactics or warnings that "you must act today" or "tomorrow may be too late".
It is impossible to list all of the Red Flags that might suggest fraud, since the scammers and con artists continue to modify and refine their stories, pitches and cons. They are ruthless and clever. Please be alert, be skeptical, and do your own homework.
And remember, Don’t Rush! You are always able to "slow down" or "pause", and you should tell the provider of loan modification services that you want to check out their license status with the DRE or the California State Bar. Any service provider who objects to that request may have something to hide, like no credentials or license (or bogus credentials) – so be wary!!! Log on, Look em up, and Check em out!!! www.dre.ca.gov
IV. WHAT YOU CAN DO IF YOU HAVE BEEN SCAMMED (OR BECOME AWARE OF A LOAN MODIFICATION SCAM)? REPORT FRAUD AND FILE COMPLAINTS WITH
1. The DRE if a real estate licensee is involved, or if the person or company is unlicensed. If the person or company is unlicensed, the DRE will file a Desist and Refrain Order. If the person or company is licensed, the DRE will commence disciplinary action, http://www.dre.ca.gov/cons_complaint.html .
2. The District Attorney, Sheriff, local police and local prosecutor in your community.
3. The California Attorney General, at www.ag.ca.gov/consumers/general.php .
4. The California State Bar if a lawyer is involved, or if an unlicensed person claims to be a lawyer at www.calbar.ca.gov .
5. The California Department of Corporations, at www.corp.ca.gov , if a loan modification claims to be operating under a California Finance Lender License.
6. The Federal Trade Commission, at www.ftc.gov . They have an excellent fact sheet on Foreclosure Rescue Scams.
7. Federal Bureau of Investigation (FBI), at www.fbi.gov .
8. HUD, at www.hud.gov .
9. The Federal Deposit Insurance Corporation (FDIC), at www.fdic.gov .
10. The Better Business Bureau in your community.
11. The Chamber of Commerce in your community.
12. File a Small Claims Court action. These are informal courts where disputes are resolved quickly and inexpensively by a judge. Since 2008, you can recover up to $7,500 in Small Claims Court. You represent yourself, and can request a judgment for money damages. If your judgment is based on fraud, misrepresentation, or deceit, or conversion of trust funds, and the judgment is against a real estate licensee, DRE has a Recovery Fund that may be able to pay your claim. Go to the DRE web site at www.dre.ca.gov , and look under the tab for "Consumers". Also, the California Secretary of State has a "Victims of Corporate Fraud Compensation Fund" that provides restitution to victims of corporate fraud. Go to the Secretary of State’s web site at www.sos.ca.gov/vcfcf for more information.
I. HOME LOAN MODIFICATIONS.
Because of the current economic situation, you may not be able to afford your mortgage payment. If you are also not able to refinance your home loan, an option that may be available to you is a Loan Modification.
What is a Loan Modification? That is where you and your lender agree to modify one or more of the terms of your home loan. The terms could be a lower interest rate, an extension of the length of the loan (like making a 30 year loan into a 40 year loan), a conversion of an adjustable rate loan (called an ARM) to a fixed rate, the deferring of some of your payments, or any other modification of loan terms.
The goal of a Loan Modification is to help you keep your home and to give you a real, meaningful, sustainable, and long-term adjustment to your current home loan that works for your financial situation.
II. BEWARE OF LOAN MODIFICATION SCAMS AND CON ARTISTS, WHO USUALLY DEMAND THE PAYMENT OF UPFRONT FEES.
Just like after a hurricane hits, where unscrupulous contractors and repair people may collect money for repairs and then not do anything, there are numerous rogue and dishonest operators and companies (many of whom are unlicensed) that have appeared in the wake of the current economic downturn -- and more are popping up every day. They make false promises about their abilities to help get you a loan modification, collect money up front, and then do nothing or next to nothing. They are predators who take advantage of those who are or may be vulnerable.
III. THINGS TO DO TO PROTECT YOURSELF FROM BECOMING A LOAN MODIFICATION OR FORECLOSURE RESCUE SCAM VICTIM.
A. Do It Yourself (and Do It As Soon As Possible) -- You can contact your mortgage servicer and/or lender directly and request a Loan Modification that works for you and your lender. Don’t wait to call if you cannot make or believe you will not be able to make your mortgage payments. Be persistent! - call back many times. Make detailed notes about your attempts to call, when you have left messages, who you speak with, what was said, and what offers are discussed and/or made.
B. Other Free and Safe Options -- If you don’t believe you can negotiate a Loan Modification yourself, or if you do not want to, there are free and safe options available to you.
1. The U.S. Department of Housing and Urban Development ("HUD") offers Foreclosure Avoidance Counseling through non-profit agencies in California. Go to HUD’s web site at www.hud.gov, or call 800-569-4287, to find counselors. HUD also offers information to homeowners facing the loss of their home.
2. HOPE NOW Alliance - this is a cooperative effort of home loan counselors and lenders, and it consists of HUD intermediaries. Go to the HOPE NOW web site at www.hopenow.com or call 888-995-HOPE.
C. Locate and Work with a Legitimate, Licensed, and Qualified person or company ("Log on, Look em up, and Check em out")
1. California licensed real estate brokers can perform loan modification work, and licensed real estate salespersons can do such work under the supervision of their employing broker.
While it is legal for a real estate broker to charge you in advance of performing the loan modification services before a Notice of Default is recorded, you do not have to pay anything in advance of a successful loan modification, and all broker fees are negotiable. If a real estate broker wishes to charge an advance fee, he or she must submit an Advance Fee Agreement and all supporting materials to the Department of Real Estate ("DRE"). If the agreement and materials meet the requirements under the law, DRE issues a no-objection letter. All fees collected in advance must be properly handled as trust funds, which require special handling and must be deposited into the broker’s trust account. A licensee must refund to you any unearned portion of the advance fee(s) collected if any of the promised services are not completed.
But please understand that a no-objection letter does not mean that DRE recommends, approves or endorses the agreement or the services of the real estate licensee. You should go to DRE’s web site at www.dre.ca.gov, review and check the information on advance fees and loan modification services, carefully review the public license information on the real estate broker (that information will include any disciplinary history), and look for any Desist and Refrain Orders (D&Rs) that have been issued against companies and individuals. If a D&R has been issued, that means that DRE has determined the individual and/or company is unlicensed and/or has operated unlawfully.
2. California licensed lawyers can also perform loan modification work, but only when such lawyers render those loan modification services in the course and scope of their practice as an attorney at law.
Lawyers can also charge fees in advance (typically called a retainer), and even after a Notice of Default has been recorded. But lawyers must have a written fee agreement with you. And as is the case with real estate licensees, you do not have to pay anything in advance of a successful loan modification, and all legal fees are negotiable. Any fees that you pay to the lawyer(s) in advance do not have to be placed in their trust accounts.
Just as you should do with real estate licensees, check out lawyers by going to the website of the California State Bar, www.calbar.ca.gov. Check the lawyer‘s bar membership records and look for any discipline.
Unfortunately, some loan modification business models have claimed lawyer involvement but they are just unlawful schemes to avoid the prohibition against the collection of advance fees by a real estate licensee after a Notice of Default is recorded. In others, lawyers are just a "front" or non-participating "magnet" for business from desperate homeowners.
****Be on Guard and Check Them Out -- Do Your Own Homework**** In addition to looking at the license records, contact the Better Business Bureau to see if they have received any complaints about the person or company. But please understand that this is just another resource for you to check, and the loan modification provider might be so new that the Better Business Bureau may have little or nothing on them (or something positive because of insufficient public input).
Also, and very importantly, ask the loan modification "specialists" (whether they are real estate licensees or lawyers) about their financial, mortgage and real estate experience, the options and methods they use to renegotiate home loans, when they were first licensed, whether their license is still active, whether they have ever been disciplined, where they got their experience, and also ask them to define a loan modification and the process that they will undertake and the time that they will spend to negotiate a long-term, affordable and sustainable modification for you.
D. Signals of Fraud/Red Flags to Watch Out For
1. Demand for payment up front (advance fee payment). While not unlawful if paid to licensed persons in the certain limited situations discussed above, the demand or request for advance payment should alert you to the possibility of fraud.
2. Promises or guarantees of success, such as "We Can Save Your Home. We Have Saved Thousands. Free Consultation. Money Back Guarantee". No such guarantees are possible, and there are no assurances of a successful loan modification.
3. Too good to be true testimonials, such as "We Modified Terri G’s Adjustable Rate Loan, Which Had Spiked to 8 Percent, to a 3.5 Percent Fixed Rate Loan".
4. Claims that a loan modification company is attorney-backed, attorney-affiliated, or attorney-based -- especially where no lawyer or law firm is identified or mentioned. Many of these entities are simply using the name of an attorney (the name might be for show only, and/or there might not even be a lawyer involved) and scams skirting the law.
5. Claims that a loan modifier is operating under a California Finance Lender‘s (CFL) license issued by the California Department of Corporations. This is not lawful according to the Commissioner of the Department of Corporations.
6. A request that you grant a "power of attorney" to the loan modifier. The scammer may use the power of attorney to sell the home right out from under you.
7. A request that you transfer title to your home to the loan modifier or some third party. This is likely evidence of a scam where these scam artists will strip all of the remaining equity in your home.
8. Promises that you can repair your credit history by the payment of rent to the loan modifier or some third party.
9. Lease/rent-back scams, where you are told to transfer title to a third party, rent the home from that party, and then buy it back later. Transferring your deed gives the con artists the ability to evict you and sell the home.
10. Instructions to pay someone or some company other than your home loan lender or servicer.
11. Claims that a loan modification company will file a bankruptcy or other frivolous case for you to "force" a lender to negotiate a loan modification. So-called "forensic loan reviews" may fall into this category.
12. Assertions by the so-called loan modifier that you should just sign documents that they have filled out, without reviewing them first. You must carefully read and understand all of the documents you sign. Be especially wary of promises by salespeople that they will "take care of everything" and you just need to sign "a bunch of forms with boring legalese".
13. Lawyers or real estate licensees who tell you that they have no time to meet with you face-to-face.
14. Unlicensed people or companies.
15. Instructions from a loan modification provider that you should not contact your home loan lender or servicer, a lawyer, an accountant, or a non-profit housing counselor.
16. Being advised to miss payments in order to improve your chances of getting a loan modification.
17. High-pressure sales tactics or warnings that "you must act today" or "tomorrow may be too late".
It is impossible to list all of the Red Flags that might suggest fraud, since the scammers and con artists continue to modify and refine their stories, pitches and cons. They are ruthless and clever. Please be alert, be skeptical, and do your own homework.
And remember, Don’t Rush! You are always able to "slow down" or "pause", and you should tell the provider of loan modification services that you want to check out their license status with the DRE or the California State Bar. Any service provider who objects to that request may have something to hide, like no credentials or license (or bogus credentials) – so be wary!!! Log on, Look em up, and Check em out!!! www.dre.ca.gov
IV. WHAT YOU CAN DO IF YOU HAVE BEEN SCAMMED (OR BECOME AWARE OF A LOAN MODIFICATION SCAM)? REPORT FRAUD AND FILE COMPLAINTS WITH
1. The DRE if a real estate licensee is involved, or if the person or company is unlicensed. If the person or company is unlicensed, the DRE will file a Desist and Refrain Order. If the person or company is licensed, the DRE will commence disciplinary action, http://www.dre.ca.gov/cons_complaint.html .
2. The District Attorney, Sheriff, local police and local prosecutor in your community.
3. The California Attorney General, at www.ag.ca.gov/consumers/general.php .
4. The California State Bar if a lawyer is involved, or if an unlicensed person claims to be a lawyer at www.calbar.ca.gov .
5. The California Department of Corporations, at www.corp.ca.gov , if a loan modification claims to be operating under a California Finance Lender License.
6. The Federal Trade Commission, at www.ftc.gov . They have an excellent fact sheet on Foreclosure Rescue Scams.
7. Federal Bureau of Investigation (FBI), at www.fbi.gov .
8. HUD, at www.hud.gov .
9. The Federal Deposit Insurance Corporation (FDIC), at www.fdic.gov .
10. The Better Business Bureau in your community.
11. The Chamber of Commerce in your community.
12. File a Small Claims Court action. These are informal courts where disputes are resolved quickly and inexpensively by a judge. Since 2008, you can recover up to $7,500 in Small Claims Court. You represent yourself, and can request a judgment for money damages. If your judgment is based on fraud, misrepresentation, or deceit, or conversion of trust funds, and the judgment is against a real estate licensee, DRE has a Recovery Fund that may be able to pay your claim. Go to the DRE web site at www.dre.ca.gov , and look under the tab for "Consumers". Also, the California Secretary of State has a "Victims of Corporate Fraud Compensation Fund" that provides restitution to victims of corporate fraud. Go to the Secretary of State’s web site at www.sos.ca.gov/vcfcf for more information.
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