Monday, December 29, 2008

Distressed Homeowners Should Stick with Mortgage Assistance Nonprofits

On December 26, 2008, the Washington Post reported that for profit mortgage assistance companies are charging upwards of $2,500 (and sometimes, more) to assist distressed homeowners during this mortgage crisis, where nonprofits do it for a lot less and with better results.  Below is a brief excerpt of the article:

A growing industry has emerged to take advantage of the unprecedented wave of foreclosures, charging distressed homeowners for help negotiating better loan terms -- a service provided for free or for a nominal fee by many nonprofits.

Such companies charge $500 to $2,500 or more and are drawing the ire of consumer advocates, regulators and lenders, who say many are just the latest version of foreclosure rescue scams and can make it more difficult for homeowners to get help.

"You don't need to go out and hire someone to help you," said Michael Gross, managing director of mortgage servicing for Bank of America.  "It is very, at times, frustrating to find a homeowner who has paid a for-profit company $3,000 to $5,000 in an upfront fee, when they could have gotten the same or better assistance free."

Loan modification firms say they are taking up the slack left by unresponsive lenders and overwhelmed nonprofit groups. "Nonprofits are not as efficient as the regular market," said Moose M. Scheib, the head of Michigan-based, a loan modification firm that charges homeowners $1,500 to help renegotiate their mortgages. "I think the difference is probably more attention you get from us."

. .  .

"We are extremely concerned about the huge proliferation of for-profit companies making a buck on these people," said Laurie Maggiano, senior policy adviser at HUD's Office of Housing. The department has certified 2,300 nonprofit housing counseling agencies across the country, which are required have at least one year of experience administering a housing counseling program, Maggiano said.

For the full story, please click here.

The article also includes a discussion of local Virginia, Maryland and District of Columbia laws and the extent to which these for profit companies and their practices are regulated.  The article also demonstrates the important role nonprofit legal service providers are playing in helping homeowners to resolve unfair practices by these for profit companies, and also the role that nonprofit legal service providers and other nonprofits are playing in helping homeowners restructure their mortgages avoiding foreclosure.


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Words from an Opinionated California Lawyer

In California, the Department of Real Estate website ( lists the companies that have DRE "permission" to modify loans... add to this list any licensed California attorney, and that is where you should begin your due diligence when you seek help in California. Other states probably have similar laws, so check with your own state DRE.

My law firm has been getting more and more calls recently from homeowners that were victims of predatory lenders who put them into an unaffordable loan and now fell into the hands of those same people who sold the toxic loans but profess to be saviors... DON’T BE A VICTIM TWICE!

Do your homework and THOROUGHLY investigate any firm before hiring them to save your biggest asset and the place you call “home.” These scammers are popping up like dandelions on a freshly mowed lawn. They advertise on the Internet, freeway billboards, radio, television, and print media everywhere. Make no mistake, in many cases, these are the exact same loan officers and mortgage brokers who fleeced homeowners the first time around. After losing their jobs with the crash of the mortgage industry, they have found a new way to make ill-gotten profits from hard-working homeowners through loan modifications.

In California, with very few exceptions (and attorneys are one exception), it is against the law for anyone to take money up front for helping a homeowner who is in default. Don’t trust a company that begins its relationship with you by breaking the law.

Of course, this is one lawyer's biased opinion, but one based on many distressing calls to my office every day. And, yes, my firm does take cases against loan modification companies who have violated laws. This field is quickly becoming one of the fastest growing sections for our mortgage law firm.

- Paul J. Molinaro, Esq.

Posted by: PaulMolinaroEsq | Dec 31, 2008 3:57:13 PM

Why only non profits? People do not need to use those modification companies either, as there is a lot of mortgage aid and refinancing out there to help you lower payments. According to this site Citigroup, Fannie Mae, The federal gov't FHA, many states, JPMorgan Chase, Wachovia, and Bank of America/Countrywide have committed to helping over 2 million homeowners between them keep their homes. So just contact the banks directly yourself, and bypass all these companies, including non profits

Posted by: joncmac | Feb 28, 2009 5:34:47 PM

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