The modification industry continues to be shaped by federal regulators and secondary marketing giants. Modification firms in three states faced legal actions by federal and state regulators, with one attorney general claiming many of the companies are “nothing more than rip-off artists.”
Under the Home Affordable Modification Program, Freddie Mac’s requirement to solicit borrowers who are 31 days delinquent must now be met within 50 days of delinquency, according to servicer bulletin number 2009-13. While digital documents are permitted in many cases, they are not acceptable for the first trial period payment.
In addition, Freddie now requires a Hardship Affidavit for modifications closed on or after April 21 and is establishing procedures to report race, ethnicity and gender.
Over at Fannie Mae, servicers were advised to report instances where a subordinate lienholder refuses to subordinate, Canfield and Associates Inc. reported.
The Federal Trade Commission announced Friday a rulemaking proceeding involving foreclosure rescue and loan modification services. The Mortgage Assistance Relief Services rulemaking deals with the rapid growth of loan modification companies in the current recessionary environment.
“The FTC is seeking public comment to determine whether certain practices by companies providing these services are unfair or deceptive and should be reined in by proposed rules,” the statement said. “FTC is particularly interested in receiving comment on the costs and benefits of prohibiting or restricting the payment of advance fees for loan modification and foreclosure rescue services.”
Dinamica Financiera LLC, Soluciones Dinamicas Inc., Jose Mario Esquer and Valentin Benitez were all charged in an FTC complaint of falsely promising delinquent Spanish-speaking borrowers, among other things, that they would obtain mortgage loan modifications — though they allegedly failed to do so in numerous instances. The U.S. District Court for the Central District of California entered a temporary restraining order on May 20 halting the practices and freezing the defendants’ assets.
The FTC claims that the defendants have already collected more than $3.3 million, and the agency seeks redress.
In Missouri, Attorney General Chris Koster filed a lawsuit against Gateway Mortgage Modification LLC for allegedly collecting fees to negotiate modifications but failing to do so. St. Louis-based Gateway, which has about 200 active clients, charges modification fees of $2,159 for loans up to $100,000 and $2,999 for loans up to $500,000. It collects up-front modification fees, which are illegal in Missouri.
“While the company also promised customers its legal department would work on their case, in reality, the company does not have any lawyers and its employees do not have any legal background or training,” Koster said in the statement. “I want to reiterate that many of these foreclosure relief companies are nothing more than rip-off artists.”
Pennsylvania’s Department of Banking issued a cease-and-desist order against U.S. Mortgage Group Inc. of Philadelphia, a May 22 news release said. U. S. Mortgage, a licensed mortgage broker, and owner Marc Dambrosio have ignored repeated requests for information by the state, including information about U.S. Mortgage Mod LLC.
A state examiner that went to U.S. Mortgage in an attempt to gather information was escorted out of the building by a security guard who was ordered to do so by Dambrosio — “a clear violation of state law,” the state said.
First-quarter modifications at Citigroup Inc. were up 23 percent from the fourth quarter, according to a report released last week by the New York-based institution. Fewer than one-quarter of loans modified between the October 2007 and December 2008 had become at least 60 days past due again, with an improvement noted in the fourth-quarter 2008.
Moody’s Investors Service released a report last week indicating that the Hope for Homeowners refinancing program should generally be more attractive for a borrower than a modification because it eliminates negative equity due to home price declines.
In the Spring edition of FDIC Consumer News, the Federal Deposit Insurance Corporation warned borrowers to deal only with lenders, businesses and other organizations with whom they already have a relationship. The FDIC also warned about up-front fees, firms claiming high success rates and making mortgage payments to anyone but the lender.
Roseville, Calif.-based New Leaf Modifications Inc. reported this week that it has helped borrowers obtain modifications on $80 million in mortgages since it began operations.
eModifyMyLoan announced Monday a $199 eMod Qualifier tool to help borrowers navigate the modification process without the help of attorneys and loan modification companies.
Servicers should beware of Boca Raton, Fla.-based Documentaudit.org — an attorney-owned firm that searches for compliance errors then attempts to extort better modification terms from the lenders.
“It seems that investment properties, second homes, and jumbo mortgage loans are turned down for modification almost immediately, in the absence of leverage against the lender, like a failing mortgage loan audit,” the statement said. “These audits are showing a common violation in adjustable-rate mortgages, where the amount financed is understated.
“If it is as little as $100 — it can be a statutory defense against foreclosure.”
Federal Trade Commission v. Dinamica Financiera LLC, a California limited liability company, Soluciones Dinamicas, Inc., a California corporation, Valentin Benitez, an individual, Jose Mario Esquer, an individual, and Rosa Esquer, an individual.
Civil Action No. 09-CV-03554, File No. 082 3103, May 12, 2009 (United States District Court Central District of California)
