Money

How Many Homeowners Will Be Scammed Twice?

By Ilyce Glink

Updated on: July 29, 2009 / 12:26 PM EDT / MoneyWatch

If you had great credit but were thrust into a subprime or Alt-A loan because someone made a heaping pile of change from it, I believe you were scammed.

And if you were told that the only way to qualify for a mortgage you couldn't afford was to do a stated income loan where the lender stated how much you earned (regardless of your actual income), I also believe you were scammed.

Sure, home buyers should have taken on the responsibility of learning how these mortgages worked and how much income was needed to keep these loans. But, who actually reads their 40-page loan docs? Apparently, most Americans don't.

So here we are, stuck in the biggest housing crisis since the Great Depression, wondering how we're going to get out of it and get back to something approaching normal. But instead of solutions, we seem to be getting into an even bigger mess.

According to a new investigation by the New York Times, some of the very same mortgage brokers who made billions of dollars worth of exotic and sub-prime mortgages during the housing boom have now gone into the seamy side of the loan modification business. These mortgage brokers, who pushed unsuspecting homeowners into exotic mortages they couldn't afford for five minutes - let alone five years - are now offering to do loan modifications all for the low, low price of $3,450.

I say "seamy" because the very best thing you can do if you need help with your mortgage is to call the Homeowners for Hope Hotline: 888-995-HOPE, go to the MakingHomeAffordable.gov website, or call your mortgage lender directly. But scam loan mod companies don't tell you that, just like scam credit repair companies don't tell you that you can fix your own credit and raise your own credit score simply by paying your bills on time and in full. Such is the way of the American scam artist.

Unfortunately, primarily because they don't tell you the truth and try to scare already terrified homeowners, scam loan mod companies are extremely effective in luring in unsuspecting homeowners who don't realize that lenders aren't charging anything to do loan mods. Instead, homeowners on the verge of foreclosure scrape together or borrow cash that could otherwise be used to pay down their loan (or catch up on a delinquent payment) and pay these scam loan mod companies thousands of dollars to do, well, nothing that the homeowners couldn't do for themselves.

While losses from mortgage fraud are estimated to have risen 83 percent from FY2007 to FY2008, the FBI is cracking down on scam loan mod companies. That's the good news.

But homeowners need help getting mortgage lenders to focus on them. Clearly, mortgage lenders aren't processing loan mods fast enough, or I wouldn't get dozens of calls each week from homeowners who can't get their lender to call them back.

Over the weekend, on my radio show, I asked Ed Delgado, a Wells Fargo senior vice president, what borrowers can do to get their lenders to help them with loan mods. Delgado said that two years ago, the loan modification business didn't even exist. Lenders are still getting up to speed, he said. But the best thing homeowners can do is to call their lenders frequently - even to the point of being annoying.

It may take more of your time to get your lender to pay attention to you - but it's a heck of a lot better than being scammed.