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Homeowners in need often become victims

Some companies ask for upfront fees to modify home loans and then fail to ever contact the lenders

Posted: April 9, 2013 2:00 a.m.
Updated: April 9, 2013 2:00 a.m.

A Santa Clarita home is featured above. Experts advise homeowners to seek help from nonprofit organizations if they need help modifying a home loan.

 

If a company is asking for money upfront to perform a loan modification service, that’s a red flag, said a local Realtor.

Every single week Cherrie Brown and her realty partner, Zachariah McReynolds, come across a person who is paying fees to a modification company and getting nothing in return, Brown said.

Frustrated by the number of homeowners who are being taken advantage of, Brown and McReynolds are personally paying to rent space at two Santa Clarita Valley hotels to host events by the nonprofit organization Neighborhood Assistance Corporation of America to help homeowners in need.

“It makes me so angry,” Brown said. “I can’t believe that years later there are still so many victims of these scams. They (loan modification companies) prey on the people in need.”

Even though homeowners are protected by a Federal Trade Commission ban prohibiting loan modification companies from collecting fees upfront, before a modification has been accepted by the lender, scores of companies are still selling services – often fraudulently – to desperate homeowners.

By the time Brown and her partner get involved, some homeowners have often already paid thousands of dollars in fees for a service that has never been provided, she said.

Fees without results
“One woman paid a $2,000 loan modification fee. They sent her a really nice packet of information and looked like they were doing such a standup job,” Brown said. “I called the bank, but, they showed no documentation from this company. The bank had never been contacted by them.”

Another red flag, according to the FTC, is any mortgage relief company that advises the homeowner refrain from contacting his or her bank or lender.

If the homeowner is in touch with his lender, Brown said, he’ll know whether the loan modification company is working on his behalf – or doing nothing at all.

Also, one of the greatest tricks of loan scammers is to get their victims to stop making payments, said the California Department of Real Estate.

“Someone called me last week to tell me his house was going to auction tomorrow even though he had hired a modification company,” Brown said. “He had no idea a sale had been ordered until the notice was posted on his house.”

Another SCV resident learned the loan modification company she was working with had posted four $10,000 liens against her house when Brown went to pull the title, she said.

The resident had been sent documents to sign to postpone a sale by the lender. Without reading the fine print, the person actually signed four grant deeds against their property.

Too many homeowners still don’t know it’s illegal for a company to charge fees upfront, she said. Most of these companies are fraudulent, even if they appear to check out.

Homeowner services
“HUD provides free counseling services,” Brown said. “It’s not a quick, easy process but there are definitely answers.”

If you are not dealing with a California attorney, or a licensed California real estate broker, a homeowner should be dealing with a HUD approved non-profit counseling agency, according to the Department of Real Estate.

NACA, the counseling service Brown and McReynolds are bringing to Santa Clarita this spring, is approved by HUD to provide services in California.

An exception to the no-advance-fees rule, attorneys are allowed to charge advance fees, but the state agency advises a homeowner to get a written fee agreement if the charge is going to exceed $1,000.

Brown advises homeowners to use nonprofit HUD and state approved counseling services, saying she’s also worked to resolve many problems that involved attorneys who claimed to be helping homeowners.

The state agency emphasizes that homeowners do not have to give up any interest in their property, or even partial ownership, to anyone for a loan modification.

If a homeowner is asked to sign papers with the words “Quitclaim,” “conveyance,” “All Inclusive Deed,” “Assignments of Rent,” or anything that appears to be a legal transfer of title, he or she should stop the process immediately, the agency said.

If a homeowner has been scammed, the state of California advises homeowners to file a complaint with the Department of Real Estate, local police and the District Attorney’s Consumer Protection Unit.

“Almost every short-sale I’ve handled this year – almost every single person – has paid one of these fraudulent companies,” Brown said. “I only know one person that actually got help. But her friend went through the same company and got nowhere with it.”

In the meanwhile, homeowners who need help can attend one of two local counseling sessions that Brown and McReynolds are sponsoring on May 4 at the Embassy Suites, and June 30 at the Valencia Country Club.
If there appears to be enough need locally, Brown said she and her partner will host more events in the fall.

 

 

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