Federal regulators are suing two bogus modification companies, and a private firm has put a bounty on another allegedly illegal operation. Meanwhile, as service providers increase their modification offerings for mortgage servicers, a growing number of modification companies are emerging to exploit lender compliance errors.
With delinquencies at record-high levels, TowerGroup said Monday that foreclosure is sometimes a better option than loan modification. The research firm noted that delinquencies and foreclosures will peak in mid-2010, when the foreclosure rate is expected to reach 3.2 percent and the delinquency rate is projected to climb to 8 percent.
“Because many borrowers eventually default after servicers modify their loans — lenders, investors, regulators and legislators need to recognize that foreclosure may be the best treatment for some borrowers,” TowerGroup said.
In California, 136,785 mortgages were modified last year under a January 2008 subprime agreement between Gov. Arnold Schwarzenegger and 10 major mortgage lenders, the state’s Department of Corporations reported earlier this month. Since the agreement was made, many of the largest state-licensed mortgage lenders and servicers now participate in the survey, which reportedly represents more than half of California’s home mortgage market.
A restraining order issued last week by the U.S. District Court for the District of New Jersey against Hope Now Modifications LLC and Hope Now Financial Services follows complaints filed by the Federal Trade Commission alleging the two firms tried to affiliate with the non-profit Hope Now Alliance, a news release Tuesday said. The companies allegedly promised loan modification services and took up-front fees but then failed to obtain the modifications.
MFI-Mod Squad LLC of West Palm Beach, Fla., is offering a $3,500 reward for information that leads to the arrest and conviction of Chris Campbell of Lionstar Financial, according to a statement Tuesday. MFI, which says it works to expose illegally run modification programs, claims Campbell scammed a doctor and his fiancé out of $3,500. Campbell took the money but did not deliver — making excuses for months and sending the couple bogus bank letters.
“I know there are other victims, so I’ve decided to offer a $3,500 reward,” MFI owner Steve Dibert said in the statement.
IBM is offering a new product for loan servicers that it says processes large volumes of loan modification requests with “greater speed, efficiency and accuracy,” a press release this week indicated. The system analyzes borrowers and portfolios and provides Web enabled modifications, loan modification fulfillment and imaging.
Quantrix announced last week an online, interactive mortgage modification program that uses the FDIC’s “Mod in a Box” system to model the impact of adjusting housing-to-income ratios and rapidly fluctuating values. The model compares multiple scenarios to determine the best option.
The National Loss Mitigation Association has launched a certification program in an effort to set standardized policies, procedures and a code of ethics for loan modification and loss mitigation specialists, according to an announcement last week. The group hopes to utilize inactive mortgage professionals to connect distressed borrowers with mortgage servicers.
Loan modification service providers who complete the certification process will be able to “identify to the general public that they are in compliance and adhering to TNLMA standards and code of ethics,” the association said in a statement.
National Loan Auditors, which exploits compliance errors by mortgage lenders so that its customers can extract better modification terms, said last week that it has developed a new product in anticipation of cramdown legislation becoming law that is designed for bankruptcy attorneys, judges and trustees.
Yourkasa.com hopes to find modification prospects through its new loan modification and repayment plan services, a press release Tuesday said.
The Lawyer in Blue Jeans Group is hungry to represent delinquent borrowers seeking loan modifications and hopes a list released Tuesday of nine reasons why borrowers should utilize attorneys for modifications will stir up business.
Florida lawyer Christopher Boss issued a news release Monday warning delinquent borrowers who are vulnerable about loan modification companies that guarantee results. The Yesner & Boss partner also warned about companies that don’t comply with a Florida law that requires disclosures be given to modification prospects.
San Gabriel Valley Mortgage announced last week that it has received approval from the California Department Estate to charge advance fees to perform a modification.
Federal Trade Commission, Plaintiff, v. New Hope Property LLC, also dba New Hope Modifications LLC, Brian Mammoccio, and Donna Fisher, Defendants.
Case 1:09-cv-01203-JBS-JS, FTC File No. 092 3068, March 17, 2009 (U.S. District Court for the District of New Jersey)
