Witch Hunt or Consumer Protection? – 178 loan companies Pursued by the Government Mod
Detroit – Over the past few weeks I noticed a substantial increase in the number of loan modification companies under investigation by various government agencies.
All I can say is that it is time.
Now do not misinterpret that statement – I think that loan modifications can be part of a viable solution to achieve our country out of the current housing crisis, but it is too early to determine its effectiveness in the long term.
Also I have nothing against the loan modification companies in general, nor the people who work in them. I met and connected with many individuals who intend to really help people and make every effort to do so.
Finally, many homeowners need some assistance since lenders do not have their best interests in mind when they do loan modifications and many lenders bring the process out for long.
On the other hand I personally have heard many stories of business owners victims of loan modification, have heard the same stories of mortgage companies and have read many more online.
High risk of Loan Mods
Me target = "_blank"> predicted over a year ago that loan modification companies would become the "subprime" new "churn and burn "debacle. This was caused by my remarks that many local authors subprime loans were flocking to make loan modifications. Even I have heard several stories of these authors on the same customers who had placed in subprime loans, with special offers loan modifications do now to them.
It's not really a barrier to entry for loan modifications. All you need is a phone and the ability to find customers. Finding customers is easy with so many homeowners struggling with their mortgage payment.
All this should sound familiar as it applies to mortgage industry in general, until recently, when state governments began requiring individual licensing for loan originators and the federal government created a national registration system.
When Michigan enacted its Registration Act Loan Officer, April 1, 2009, the state expects 10,000 to register on the basis of past data. So far only 3141 have met the requirements of 24 hours of class, spent a multiple choice examination and selection background. How many unregistered you think they are now using their knowledge limited to mortgage loan modifications?
Desperate people do desperate things
One might think that a homeowner, burned by bad mortgages, is being a bit more cautious when considering a loan modification.
The number of loan companies appearing mod however, prove otherwise. It's supply and basic demand – the number of these companies will not expand if there were desperate homeowners to support them.
So how owners house burned by these companies? In no particular order:
- Pay fees in advance for an amendment was never completed.
- Being told you'll get a reduction of principal balance, when in fact it rarely happens.
- Getting approved for a modification that raises your payment or negligible decreases.
- Following the advice not to contact the loan lenders during the modulation process, only to get an execution mortgage.
- Not being fully aware of the possible credit damage, legal issues and tax consequences.
Everything reduce these potential companies and under-delivery.
What led the government of the Law So Long?
If I saw this problem coming for over a year, you think that intelligent people in our government would have saw it coming too.
In a recent informal survey of mortgage originators to "Think Big little book", 81% said that more than 50% of those making changes loans are "rats."
Unfortunately, as with the mortgage meltdown and banking crisis, the government only seems act after the damage is done. Here is a list of the agencies currently pursuing loan mod companies:
- Federal Commission Trade
- United States Attorney's Office for the Central District of California
- Arizona Attorney General's Office
- California Department of Justice
- California Department of Real Estate
- California State Bar
- Colorado General Attorney's Office
- Idaho General Attorney's Office
- The Attorney General of Illinois
- Iowa Department of Justice
- General Kansas Attorney General's Office
- Maine General Attorney's Office
- Maine Department of Professional and Financial Regulation, Bureau of Protection Consumer
- Maryland Department of Labor, Licensing and Regulation Office of the Commissioner of Financial Regulation
- Massachusetts General Attorney's Office
- Michigan General Attorney's Office
- Missouri Attorney General's Office
- New Jersey Office of Attorney General
- New Jersey Department of Banking and Insurance
- New Mexico Attorney General's Consumer Protection Division
- North Carolina Department of Justice
- Ohio General Attorney's Office
- Oregon Department of Justice
- Attorney's Office Attorney General
- Washington Attorney General
The charges are being filed because of misleading and / or false advertising (Section 5 of the FTC Act), the charge in advance for services rendered prior to the unlicensed activity, mail fraud, misconduct by attorneys and several others.
Solutions
The Obama really needs to step up and address this issue quickly. The thieves and sharks should be forced outside the industry to protect the owners. Honest professionals also need protection – from over-zealous government agencies. It would be a pity if that they were actually doing good things for the owners put out of business, fined or imprisoned.
One option would be easy to implement to allow loan modifications are done only mortgage companies and attorneys. The mechanisms are already in place across the country to control this.
A better solution would be for the Administration to create a national solution, instead of letting all 50 states to prepare their individual plans.
For a list of loan modification companies are under investigation, click here and then click "preview."
About the Author
Drew Sygit writes and speaks about the mortgage & real estate industries. He holds mortgage industry designations CMPS, CMC, CRMS, CMLO, CALO, has an MBA and is an approved industry instructor. He’s presented, spoken and/or written for HUD, Financial Planning Association, Financial Planners Association of Michigan, Michigan Association of CPA’s, Institute of Continuing Legal Education, Oakland Real Estate Investors Association, North Oakland County Board of Realtors and numerous industry publications. He also publishes his own blog: http://drewsmortgagenews.blogspot.com. He can be reached at dsygit@TheLendingEdge.com.