Loan Modification Scams - Don't Pay These People For Help, You Won't Get It

Last Updated Mar 17, 2010 4:17 PM EDT

Are you in loan modification hell?

Do you worry that your loan modification paperwork has been lost or relegated to your loan servicer's "circular file?" Do you believe that if you pay someone $1,500, $2,500 or even $5,000 you'll be able to get the permanent loan modification you so desperately need?

If so, you're just the kind of person loan modification scam companies have been looking out for.

This morning, the Florida Office of Financial Regulation shut down several businesses that purported to do loan modifications for desperate homeowners.

According to the Naples News:

"Juan Jimenez and Lake M. Walton III, both of Naples, and Abby Jelley, of Cape Coral, were issued a cease and desist order this morning, and told to stop offering loan modification services through two Naples businesses: Modification Consulting Services LLC, and SWFL Consulting & Marketing LLC. Both businesses are run out of an office at 4760 U.S. 41 N., Suite 27. Authorities also served Michael Poka of Estero and Steven Itwaru of Naples with a similar order in Bonita Springs for Elite Financial Management Group, Home Protection Agency and a related company, Capital Group and Associates."
As the housing market tanked, Florida legislators passed a law prohibiting companies from collecting an up-front fee for modifying mortgages. Some of these companies were accused of misleading and deceptive advertising, and as acting as unlicensed loan originators.

Here's how the scam worked: In ads posted on Craig's list, and on the company's websites, desperate homeowners were lured in with promises of loans that could be refinanced or modified. Only a tiny percentage of those who filled out applications for temporary loan modifications were granted permanent loan modifications.

One of the companies cited claims that it joined with a national law firm in order to modify mortgages. Florida law allows attorneys to collect an upfront fee to help modify mortgages, but it can't solicit for that business. It can only help current clients.

In an example provided to the Naples News by a spokesperson for the Office of Financial Regulation, if an attorney has a client getting a divorce and that person later needs help modifying his or her mortgage, the attorney can help and get a retainer upfront. But the attorney can't solicit new business to modify mortgages.

In a press release issued this morning, Office of Financial Regulation Tom Cardwell said, "We have a lot of people out of work and struggling to keep their homes that are looking for help. Some are paying for services they never get. It is important that our residents know their rights and the laws that help protect them from being victimized in their time of need."

Another one of those laws was passed December 7, 2009. It states that anyone who provides loan modification services in Florida must be licensed. Before any Florida homeowners fork over tons of cash to anyone who you think can help you modify your mortgage, ask to see their license and registration.

What other states are licensing loan modification service providers? Who is protecting you?

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Ilyce R. Glink is the author of several books, including 100 Questions Every First-Time Home Buyer Should Ask and the upcoming Buy, Close, Move In!. She blogs about money and real estate at ThinkGlink.com.
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    Ilyce R. Glink is an award-winning, nationally-syndicated columnist, best-selling book author and founder of Best Money Moves, an employee benefit program that helps reduce financial stress. She also owns ThinkGlink.com, where readers can find real estate and personal finance resources.