John Rebchook is a former Rocky Mountain News reporter with more than 30 years of experience in writing and communications... The New York Times today had a front-page article on former subprime mortgage brokers now peddling programs that promise to help them get out of these toxic loans – for a hefty price, of course.
And as I had written about when I was at the Rocky Mountain News, the Times reports that these would-be home foreclosure saviors often take upfront fees and do nothing to lower the monthly mortgage payment. Indeed, they are preying on people when they at their weakest and most desperate. When talking to distressed homeowners they’ll say things such as: “Isn’t worth $1,000 to save your home?”
Of course, it is. But too often, the home ends up in foreclosure anyway, despite the implicit promise of the loan modifiers.
“My personal opinion is that most of this is a scam,” said Peter Lansing, president of Universal Lending (the co-sponsor of InsideRealEstateNews.com.) He said he can understand why homeowners are turning to them, because they are frustrated with dealing with red tape at lenders. The over-worked lenders are trying to triage the cases to determine who simply wants lower payments, i.e., everybody, and who actually needs help to keep from losing their homes, Lansing notes.
Lansing said the loan modifiers want to get paid upfront because they know they won’t make any money at the closing, if they are successful.
Asking for a a payment upfront, especially with no guarantee of lowering the rate or payment, is a red flag, Lansing notes.
“I don’t pay anybody upfront for any service,” he said. “I won’t pay upfront to have my lawn mowed.”
He noted that Erin Toll, the head of the Colorado Division of Real Estate, “is violently opposed” to consumers paying upfront for loan modifications.
Colorado has launched investigations or sent cease and desist orders to about 20 companies doing loan modifications in Colorado, Zachary Urban, spokesman for the real estate division told me.
Urban said he has even received phone calls at home from apparently shady loan modification companies, even though he is current on his mortgage.
He said it is hard to tell if former subprime brokers in Colorado are now promising to unravel the loans they made. But that is an unsavory practice, he said.
“It’s like they’re making sure they screw you one more time before you lose your house,” Urban said.
One thing Urban wants to make clear, however. He said that people who knowingly took high fees to make toxic loans that they knew borrowers weren’t qualified for, and are now offering people saddled with these loans phony help, are not representative of the mortgage industry.
“They’re a cancer on the industry,” Urban said.
