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In industry fraught with fraud, loan modifier offers real help

By John Rebchook, Rocky Mountain News (Contact)

Published January 1, 2009 at 8:05 p.m.

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After Eric Quinn, 27, was late on a mortgage payment for his home in Broomfield, he was hounded by companies, many from California, which, for a large fee, said they would lower his monthly payment.

But he didn't trust them.

"There are a lot of scam artists out there," Quinn said.

Instead, on the recommendation of his father, who is involved in real estate, he turned to longtime mortgage broker Randy Reed.

Reed, for less than $2,000, worked with Quinn's lender to knock down the adjustable rate mortgage from almost 12 percent to slightly more than 6.5 percent, saving him almost $800 a month and his home.

"Honestly, if it wasn't for him, I'd probably be losing my home in the near future," Quinn said. " He said Reed was the only loan modifier who agreed to refund his money if he couldn't get him a better rate.

Reed thinks he is one of the few honest players in a rapidly growing business where many companies and individuals take money from desperate homeowners facing foreclosure, and do nothing for them, state regulators charge.

"There are a lot of bad companies out there," Reed said. "I got into it because people began calling for help."

The industry is so tainted that Reed, who has more than 16 years of experience working with well-known Denver mortgage companies such as Universal Lending and Clarion Mortgage, wonders if it is even worth staying in the business that he just launched.

"I don't know if I want to be associated with an industry that the state, and please pardon me, the media, is painting as nothing but a bunch of crooks."

Reed recently received a subpoena from the Colorado Division of Real Estate regarding his new company, Loan Modifications of Colorado, but believes he is doing everything according to regulations.

Zach Urban, spokesman for the division, said because "it is such a new business," the agency sent out the subpoenas to gather information about compliance, but a subpoena does not mean the state suspected the company or individual of wrongdoing.

Reed said he supports the crackdown of the industry by Erin Toll, director of the real estate division. While Urban emphasized the division does not endorse any specific company, he said Reed has had the "most positive reaction" so far.

"Looking into this industry, there seems to be an inordinate amount of scam artists," Urban said. "The approach that Randy took was 'What do I need to do to be compliant?' That was the appropriate response."

Reed charges a $350 consultation fee for an analysis, which spells out a homeown- er's options, and what the homeowner needs to do. Homeowners can deal with lenders themselves with this information.

If they hire Reed, his fee is $1,495, although he charged Quinn less. Reed puts the money into a trust account - similar to an escrow account - and returns it to the homeowner if he fails to lower the interest rate. If he gets an agreement, but the consumer rejects the lender's offer, Reed keeps $300 and returns the rest.

rebchookj@RockyMountainNews.com or 303-954-5207

Changing your loan? Check out these tips

* Call the company that is servicing your loan as soon as you suspect there will be trouble in making your payment. Do not hire an individual or company that does not want you to call the mortgage company.

* Before hiring a for-profit individual or company, call the Colorado Foreclosure Hotline, 1-877-601-HOPE. The hotline uses HUD-certified counselors. The service is free.

* If you hire a private company or individual, make sure the person is a licensed mortgage broker in Colorado, which is required by law.

* The company should be paid the full amount only if it is successful in lowering your loan payments. The money should be held in the equivalent of an escrow account until the process is complete.

* Check out the company at the Better Business Bureau and on the Internet to see whether consumers have complained.

* If the deal promised seems too good to be true, it probably is. Not every homeowner can be helped.

Comments

  • January 2, 2009

    9:14 a.m.

    Suggest removal

    goodheart writes:

    Don't expect help from the Colorado Foreclosure Hotline. They just run you around so they can get paid and don't do a thing. My mortgage company said they have never been contacted despite the counselors lying to me and saying they are working on a modification with them.

  • January 4, 2009

    11:47 a.m.

    Suggest removal

    Homerescue7 writes:

    Interesting you write this...In todays paper, Sunday the Denver Post article written by Greg Griffin in the business section as quoted by the article, "HUD found that the division distrubuted Community Development Block Grant (CDBG) money to ineligible organizations in 2006 and 2007. Among those were homeless shelters in the Denver area and Denver housing agency that runs the Colorado Foreclosure Hotline." end quote.
    Where it that money going that is suppose to help homeowners, I know of a company that has worked with homeowners that the Hotlines answer was to sell their cars and walk to work!! The homeowner(s) then contacted a local law firm and was helped. Interesting article..many questions could be directed to these individuals.