Go to the mobile version of this Web site.

Login | Contact Us | Site Map | Paid archives | Electronic edition | Subscription Questions | Extras

Loan modification firms causing more problems for homeowners

By John Rebchook, Rocky Mountain News (Contact)

Published December 24, 2008 at 12:05 a.m.

Text size  
Lee Monson's home in Parker.

Photo by Special to the Rocky

Lee Monson's home in Parker.

Lee Monson, of Parker, visits her son in Cedar Rapids, Iowa, for the holidays. Monson and her husband paid nearly $3,000 to a loan modification company, but she says it has done nothing. Meanwhile, the Monsons are now behind on their payments and their home is in foreclosure.

Photo by Cliff Jette / Special To The Rocky

Lee Monson, of Parker, visits her son in Cedar Rapids, Iowa, for the holidays. Monson and her husband paid nearly $3,000 to a loan modification company, but she says it has done nothing. Meanwhile, the Monsons are now behind on their payments and their home is in foreclosure.

Related Links

More Real Estate

More stories »

Lee Monson said she and her husband, Rich, paid a San Diego-based loan modification company almost $3,000 in June to keep from losing their Parker home to foreclosure.

Their home now is in foreclosure and she has turned for help to the Colorado Division of Real Estate, which is in the midst of a major investigation of loan modification outfits.

"I think they should be put out of business," Monson said about Peoples First Financial in San Diego, the company that she said kept their money and did nothing for them.

She said the company originally agreed to get them a deal that would combine their high-interest mortgage payments into a single 30-year-fixed rate loan with a lower rate, something a person at the company denied Tuesday.

Erin Toll, the Colorado director of the division of real estate, recently sent out 16 subpoenas to loan modification companies in Colorado, California and Arizona.

Typically, private loan modification companies promise, in exchange for an upfront fee, to be the homeowners' advocate with the lender to get them a lower mortgage rate. But the service is provided for free by Housing and Urban Development-certified counselors, such as those that work with the Colorado Foreclosure Hotline (1-877-601-HOPE).

It appears that in many cases, if not most of them, the loan modification companies pocket the money and do nothing for the homeowners who typically already are in financial despair.

Disappointing outcome

Millions of homeowners across the country, saddled with quickly rising adjustable-rate mortgages and homes that are worth less than the mortgages, are facing foreclosure. They turn to these companies as a way of keeping their houses and are often disappointed with the results, according to state housing officials.

Monson said a company official told her not to talk to their mortgage company during the process and not to make more mortgage payments, so it would be easier to renegotiate. That is not atypical, Toll said.

The Monsons are now five months behind on their $236,300 in loans - a first mortgage of $191,300 with a 9.25 percent interest rate and a $45,000 second mortgage at 11.5 percent. Their home had been appraised at $250,000, but now is probably only worth $185,000.

A person who answered the phone at Peoples on Tuesday said, "That is totally inaccurate. We don't consolidate loans. We modify loans." He declined to give his name.

However, a free and unedited site for consumer complaints, complaintsboard.com, contains numerous Peoples complaints.

The company responded to Web site posts: "Even after reading slanderous remarks posted from the client with no validation or information to support these claims - we are willing to review all cases in an attempt to restore said Clients faith in Peoples First Financial."

Peoples First Financial was not one of the companies subpoenaed, but Zach Urban, spokesman for the real estate division, said he's not surprised.

"There are a lot of companies out there who are not even on our radar yet," Urban said. "It appears to be as rampant as the foreclosure problem is. The number of solicitations out there is staggering."

It is not uncommon for someone behind on their mortgage to receive "dozens" of calls with promises to help, he said.

Getting the word out

In addition to the subpoenas, Toll also recently entered into what she calls an "unprecedented collaboration," with Jeff Davi, the division of real estate director in California.

"(Davi) has agreed to work closely with us to shut down illegal loan modification companies that prey on consumers when they are most vulnerable," Toll said. "Mr. Davi is well aware of the problem and will do everything possible to ensure Colorado consumers are not harmed by unlicensed California companies."

Only mortgage brokers licensed in Colorado may provide home loan modifications in this state, Toll said. Many of the companies doing business here are not licensed, she said.

Davi, in a phone interview Tuesday, said he is "very pleased with our relationship with Colorado and Erin," and hopes to build similar relationships with state real estate divisions across the country, because the practices have become so widespread.

"These companies are based everywhere," Davi said. "I heard of one yesterday where a 75-year-old California woman gave her last $2,000 to a company out of Massachusetts. It is the saddest thing I ever heard."

Davi said that he would prefer people to deal with HUD-certified counselors, who do not charge a fee. "Under no circumstances, should a homeowner ever pay someone a fee upfront in exchange for a promise of a future service," Davi said.

Craig Joynt, of the American Modification Group in Centennial, one of the companies to receive a subpoena from Toll, said the company "is taking steps to be fully in compliance. We are absolutely legitimate."

Asked how many people his company has helped, he said: "I will not have any further comment."

And Traci Myers, president of the Carlsbad Real Estate Group in California, said her company received a subpoena from Toll's office, but it does not conduct any business in Colorado.

Rather, she said, the company has advertised in Colorado and across the country.

But she said she welcomes a crackdown on the industry.

"I think that needs to be done," Myers said. "The industry absolutely needs to be regulated. We get calls on a daily basis from people who say companies took their money and they have no idea what they're doing for them."

rebchookj@RockyMountainNews.com or 303-954-5207

Subpoenas for loan modification companies

Comprehensive Lending Solutions, Littleton

Sunwest Modifications, Montclair, Calif.

Loan Modification Center, Denver

American Modification Group Centennial

Loan Modifications of Colorado, Westminster

MitigationOnLineConsultants.com, Encino, Calif.

PRIDE Real Estate Lending, Lakewood

Carlsbad Real Estate Group LLC, Carlsbad, Calif.

U.S. Consumer Bailout Services, Chula Vista, Calif.

National Homeowner Assistance Services, Lake Forest, Calif.

Colorado Housing Solutions Inc., Littleton and Centennial

Freedom Foreclosure Prevention Services LLC Gilbert, Ariz.

Creative Real Estate & Finance Inc., Denver

J&J Lending Corp., Irvine, Calif.

Aria & Associates Inc., Garden Grove, Calif.

Home Funding Solutions, Orange County, Calif.

If you are facing foreclosure . . .

* Call your mortgage company immediately to start a dialogue with the lender.

* Get a handle on your finances and look for ways to reduce your expenses or increase your income, or both.

* Contact the Colorado Foreclosure Hotline, 1-877-601-HOPE.

* If contacted by a private loan modification company, do not write the company a check for future services, such as a promise to lower your interest rate or the amount owed on the loan.

Comments

  • December 24, 2008

    8:50 a.m.

    Suggest removal

    Dick_Tater writes:

    A 5 second search on the BBB shows that this business receives a "F" and has it's business license revoked. Consumers should educate themselves. I'm guessing the subject in this story was refused many other options and grabbed hold of the first people who promised him the world for $3K. That should have been a sign there. People need to realize that if they are offered a deal so much better than the rest, they should do some research to find out to make sure it is what they think it is. I'm tired of people not taking responsibility for their actions. This person is in foreclosure because they are unable to pay their mortgage. I have sympathy for people who fall upon hard times, but it is not societies fault. This person over financed his property in the first place getting an appraisal for more than the property was worth. If they actually paid too much for the property, that is dumb. If they did not and spent the additional money from the loan, that is even more dumb. Re-finance after re-finance continuing to increase their debt. Where is the money going? I wonder if they have a new car, flat screen TV or maybe took an exotic vacation recently... The story says nothing about losing employment or falling on hard times. For me I see someone who has made bad decision after bad decision. And they have just made another.

  • December 24, 2008

    9:10 a.m.

    Suggest removal

    Diff writes:

    Last year I nearly had Chase Mortgage try and do about the same to me!
    Chase was TERRIBLE to try and work with - and most of people I did try and talk to were down right rude. I also contacted one of the modification companies on this list, and when I really started asking questions - they were evasive and not forthcoming with complete or clear answers. How and why I got into the situation I was with a rising interest rate and payment was in part due to my not being as smart about some decisions as I should have been, my inability to get refinanced, the already falling value of homes and a loss of a job. I was lucky to get another job fairly quickly but could not keep up let alone catch up being behind 2 payments. I was fortunate to finally get a full Re-Fi and lowered my payment by over $600/mo.
    It is a shame that people in the interest of making a buck prey on peoples mis-fortune under the guise of "helping" them. Some of the bailout monies needs to go to help homeowners stay in their homes and reduce the foreclosure rates - that would help people, it would help the banks and mortgage holders and it would help shore up the real estate market - but instead the money has gone to Wall Street, and banks and they can not even account for it!Per another article I saw yesterday - they are surely not loaning money!
    Lastly Some Advise - never never, NEVER do business with Chase Banks - they are HORRIBLE!

  • December 24, 2008

    10:29 a.m.

    Suggest removal

    Marshdale writes:

    Diff you are correct: My credit card is with Chase. They don't even give you a phone number on your statement that you can call to discuss terms of your agreement. Yes there is a number on the card but they continually send me trick letters to get me to screw up so my terms can be altered. They always request that I respond in writing and tell me if I don't that my terms will be changed or my card will be cancelled. They are crooks of the highest order. Beware of Chase. This company is no good, as if any of them are.

  • December 24, 2008

    11:03 a.m.

    Suggest removal

    vendari01 writes:

    Isn't it fascinating how many predators slither out from under their rocks when they see an opportunity to take advantage of desperate people? Too many of them would have sold defective life jackets to the people who went into the water as the Titanic went down, and then justified their actions as 'good business'. Sociopaths proliferate.

  • December 24, 2008

    11:11 a.m.

    Suggest removal

    Diff writes:

    Marshdale - Chase would be on my list of the worst companies to do any kind of business with!
    I also had a car lease through Chase some years ago, had a minor problem that took months to get corrected - then at the end of the lease - it resurfaced. I had no choise on my mortgage as it was sold to Chase after about a year -

    Chase Banks - inhale a huge amount of air - if you get what I mean -
    I would not be sad if they failed!

    Merry Christmas all!

  • December 24, 2008

    11:44 p.m.

    Suggest removal

    FCZ writes:

    Consumers should educate themselves

  • December 27, 2008

    1:02 p.m.

    Suggest removal

    randyflood writes:

    For the Monson's as well as all the other homeowners who have been taken advantage of, the old adage "Buyer Beware" pertains. Unfortunately most discover this too late after the damage is done.

    Modifying a loan is one of the best options for a homeowner who is or who will probably become behind on their mortgage payment because their loan has adjusted (ARM) and/or a life-changing hardship has occurred. The process is simple but not easy. Most homeowners don't know the guidelines nor how to get the Loss Mitigation department instead of Collections. The process can take 3-7 months so regular follow-up is a must. For these reasons, most people should use a company that is trained in Loss Mitigation. Although I'm a licensed mortgage broker and was trained in loss mitigation years ago, I refer most people to the Colorado Foreclosure Hotline. Their service is free which eliminates the need to come up with a $2,000 - $3,500 fee to the loan modification company.

    Most lenders are very willing to modify a loan because it costs them a lot less than the $50,000 to $70,000+ to foreclose on a property. Last year I modified my own loan with Chase and got a great deal. The last Chase loan modification I did was for a friend/client. He got 2.25% for 5 years, 4.25% for a year, and 6.25% for the rest of the loan. He was also able to skip 3 months of payment. This is a fairly typical result nowadays. The Lender decides what the terms will be so don't believe a loan modification company that promises a certain percentage or # of skipped payments. Do your homework before committing to any company regardless of its profession.

    Lenders are actually improving their loss mitigation departments and the terms for the homeowners. This is a win - win for all involved. The homeowner keeps the home, no foreclosure on the credit report, no moving/storage costs, is able stay in the same neighborhood, same schools for the kids, etc. I consider modifying a person's loan to be the best option available if the homeowner fits the criteria.

  • December 27, 2008

    2:32 p.m.

    Suggest removal

    randyflood writes:

    After rereading the posts with all the Chase bashing, I felt compelled to share the rest of my story.

    Modifying my loan with Chase was a nightmare. The 1st month, they did nothing. 2nd month they started working on it and initially disapproved it. I was supposedly capable of making the higher payments. They had miscalculated my income so once they corrected their figures, it was approved. However after it was approved, no one could tell me what the terms were and I had to wait for the loan modification documents to be overnighted to me. That took over 3 months and numerous calls. Once I signed and returned the documents, a Chase supervisor accidentally disapproved it. It took another week to get that fixed. I got a great deal, but it took a lot of work and constant follow-up during the 7 month process.

    Bottom line was Chase did not have an integrated system that would allow them to communicate and track their modifications. Also if I didn't know what I was doing by being a mortgage broker trained in loss mitigation, I would have been like everyone else and would have given up - thus losing our home.

    On the bright side, Chase has significantly improved their staffing and systems so they are much more user friendly now. One day when I called, they were hiring 30 more people just to answer the phones because they were receiving 1,000+ loan modification requests a day. Chase is trying to do the best that they can just like our Government is trying to figure out how to best deal with our down spiraling economy. It can be overwhelming when you haven't had to deal with a crisis this large.

    P.S. I don't work for Chase and I do not use them when I do loans;).

    P.S.S. In this market with declining market values, if the homeowner has an FHA or VA loan, they may be able to do a streamline refinance even if they are upside down in their mortgage. It has to make financial sense. This may be a viable option especially with the lower interest rates because there is no appraisal, no verification of income, no credit score requirement, and no calculation of debt to income ratio (housing and consumer debt). Again, it has to make financial sense and must put the homeowner in a better situation so default is lessened. A loan modification would not be needed. Unfortunately a lot of homeowners with a government loan are not aware of this option.

  • January 1, 2009

    12:13 p.m.

    Suggest removal

    goodheart writes:

    I have not used any of the scam companies to help me but I have been counting on the Colorado Foreclosure Hotline people. For the past 4 months I have gotten the same runaround described here from them. While it is free, they don't help. One of them just kept asking me for documents and said "That is how I get paid, I have to justify that I TRIED to help you." She took all of my docs and submitted them for the state to pay her and did NOTHING for me. The day after Xmas I received a letter from a lawyer starting foreclosure with Wachovia. I have called and emailed the state counselor since 12/26 with no return call or email. The receptionist says she is in and then comes back to say she is busy and sends me to the voice mail. For the entire 4 months she kept saying "the modification was in process but it takes time." Now she can't be reached. I suspect she did nothing for the entire 4 months. Wachovia won't work with me because they bought these loans from World Savings. They got burned, as we all did when we were talked into an option arm. Someone needs to help those of us who have owned homes for 20 years and now will lose them and become homeless, which does no one any good. I just need help to get the loan modified. The bank has a home they can't sell and I am living in my car or have ended it all. What is wrong with this picture?

    PLEASE DON'T RECOMMEND THE FORECLOSURE HOTLINE. THEY ARE FREE, BUT THEY ARE JUST AS DISHONEST AS THE PEOPLE WHO TAKE MONEY.

    I don't know what to do.

  • February 9, 2009

    6:29 a.m.

    Suggest removal

    garypga writes:

    Has anyone heard of "Commercial SF Inc." Also referred to as "$89 Mortgage." They have offered to do a Loan Mod for me with an upfront cost of $995, and if they fail, the full amount, less $89 will be refunded.
    Thank you for your help!