Grand Junction Colorado newspaper reporter does his research on missing mortgage payments

Every now and then a news reporter actually does more research than the typical. Mike Moran of our local Business Times paper spent quite a bit of time and effort interviewing me and a few others here in Grand Junction, Colorado; investigating the fact that lenders are suggesting to distressed mortgage owners that they miss a few mortgage payments in order to qualify for a mortgage modification. Unfortunately, the paper does not have an online presence, so I can’t link to the story. I quote it here for your general information, and so anyone can see what goes into better-than- average research. Where th other sources go awry, I can’t help inserting my comments in parenthesis:

“Federal programs designed to help people pay lower mortgage payments while retaining ownership has opened the door for millions of people to hold on to their homes.

But an unintended byproduct of the programs is the emergence of scammers who charge a fee to help modify a mortgage, then offer little help or even encourage their clients to stop making payments. Such advice results in even more foreclosure filings and more people looking for places to live during the economic downturn. (My statement, based on internet research, is that it is the lenders that are advising missing payments in order to demonstrate ‘imminent default.’ which is a key requirement of the HAMP program. The scammers usually advise making payments to them, or signing over the property deed. Neither of those two statements are ethical)

The scams have prompted an investigation and warning from the state
attorney general’s office while concerns about bad advice persist.
“In some cases, the companies told consumers to stop making their
mortgage payments, leaving them at risk of foreclosure,” Colorado
Attorney General John Suthers stated in a news release. “Some borrowers
thus end up going into foreclosure as well as losing their upfront
fees.”

A man who brokers loan modifications in Grand Junction said the
problem lies with more than people in his profession. He said it’s
sometimes the lenders themselves who advise people to stop paying. “We
know the banks are behind it,” said Chris Dix, a representative for
Mortgage-Mod-Monster.com, which assists people with mortgages nationwide.
By banks, Dix said he means “lenders,” which includes any company that
might make a loan.

“I just can’t buy into that one,” said Karen Troester, a commercial
lender and vice president at the U.S. Bank branch in downtown Grand
Junction. Troester said her bank wouldn’t offer such advice. (Ms Troester, with all due respect, doesn’t work in the Loss Mitigation Dept. She wouldn’t know what is happening in the national lender call centers. Those of us who spend time daily on the internet, are well aware of what is happening nationally.)

Lonnie Knob, assistant branch manager for Freedom Financial Services,
a Grand Junction mortgage company, said: “I don’t have reason to
believe that (lenders would tell people to stop making mortgage
payments).” Knob added: “I would never advise someone to miss a
payment.”

I have since learned that the solution is to mail the entire application certified mail, return receipt requested. That makes the application a legal document, like a subpoena. The mortgage servicer is not entitled to collect a dime until the application receives a good faith consideration. Now that the servicer knows there is no profit for them, the homeowner will be amazed at how much faster the application will be dealt with.

Dix said suspicion of bad advice can sometimes be traced to those who
service loans. Because a servicer is likely to deny giving advice to
default on a loan, it’s difficult to pin blame on anyone.
People like Dix usually charge a fee of about $3,000 to help people
modify their mortgages. (That’s what my national attorneys charged.)

Clients aim to lower their mortgage payments to meet their budgets.
Many of those budgets are reduced because of pay cuts or layoffs. The
loan modification company usually works with an attorney who helps
navigate clients through the paperwork involved with applying for
federal assistance. Three such programs have cropped up during the
national housing downturn over the past 18 months: the “Hope for
Homeowners” law enacted by Congress in July 2008, the “Making Home
Affordable” program approved last March and the “Helping Families Save
Their Homes” act approved in May.

The “Making Home Affordable” program offers the Home Affordable
Modification Program (HAMP) to help homeowners modify their mortgages.
The Internet is full of stories of people who hired a loan modifier
who allegedly advised clients to refrain from making payments, then
file for bankruptcy to protect their homes from foreclosure. When
following this advice, clients usually find their credit is ruined.
Incredibly, the same loan modifier sometimes calls the client to offer
help getting out of bankruptcy for a second fee amounting to thousands
of dollars. (A reputable mortgage modification is EXACTLY designed to avoid bankruptcy. Recent history has shown that bankruptcy is to be avoided at all costs.)

Such scenarios have been alleged in Colorado as well, prompting action
from the state attorney general’s office. The office said 10 loan
modification companies “either failed to deliver results to Colorado
consumers or engaged in deceptive advertising.” One of the companies,
American Summit Financial Services of Boulder, is located in Colorado.
The attorney general has barred the companies from doing business in
Colorado unless they comply with state laws, which include a
requirement that only mortgage brokers licensed in Colorado or
attorneys licensed in Colorado perform loan modifications.

The Better Business Bureau office for Western Colorado said it had
received no confirmed reports of illicit dealings by any Mesa County
firms — or any complaints registered by consumers in Mesa County. The
BBB office was aware of the attorney general’s action, however.

The situation raises a question that begs to be asked: If clients can
be misled by loan modification specialists or other people involved in
the process, why don’t they work out the details themselves?
(The nation’s mortgage servicers have since learned that they can sandbag any negotiator anywhere. The FTC MARS rule has since mede it essentially impossible for any third party negotiator to make a profit. Mortgage modification negotiators have since slammed their doors with an incredible bang.)

“Statistically, the success rate is 20 percent for a homeowner
attempting their own loan modification,” Dix wrote in a column on his
Web site at mortgage-mod-monster.com. “Attorney groups are generally 90
percent successful at completing loan modifications.” (This used to be true up until last June, 2010. The REST Report has been run 4000 times with zero failures.)

While it might make sense to deal with out-of-town professionals when
living in Mesa County, Dix said the relationship makes it more
difficult for people to track down who gave them advice — much of which
comes over the telephone.

Also caught up in the finger pointing are mortgage companies, who are
obvious targets due to the nature of their business: helping secure
mortgages.

“Sometimes, the loan modifiers charge a fee and are perceived as
mortgage companies,” said Gwen DeCino, a mortgage planner for Monument
Valley Mortgage Company in Grand Junction. “There are some bad [loan
modifier] companies.” (The biggest problem I see is mortgage companies offering mortgage re-instatements and deferments, neither of which are beneficial to a distressed homeowner, and letting them believe they are modifications.)

What’s the motivation for someone to advise a client to miss payments
and force foreclosure? Dix said such advisors can make more money
through a client’s foreclosure than correctly modifying the mortgage.
(Mike completely missed this one: It is the mortgage servicers that benefit from a foreclosure. He corrects himself next.) “The federal program offers a servicer (and the lender he represents) $1,500 to modify a mortgage and another $1,000 each year up to a total of $4,500,”  Dix said. He said a lender can realize a better bottom line by writing off the foreclosed home or by keeping the home and selling it when the market improves. “Servicers make more by foreclosure than by fees,” he said.

The Federal Insurance Deposit Corp. compensates for 80 percent of
lenders’ losses related to foreclosures, according to the FDIC Web
site. (These are called “Loss Sharing Agreements”)

Lenders are caught in an unusual position these days. Some have
received federal stimulus funds intended to be loaned to consumers, but
lenders also hear from regulators that they need to ensure the loans go
to people with good credit. People who’ve fallen behind in house
payments often don’t fit that profile.

“The (Obama) administration says there’s not enough loan modification
going on,” said Bob Reece, president of Advanced Title Company in Grand
Junction, who noted that lenders often aren’t provided the motivation
to make such modifications.

Dix said if a loan is modified for an owner who’s fallen behind on
mortgage payments, the missed payments are usually tacked on to the
back end of the modified mortgage, assuring the client she doesn’t have
to make the missed payments right away.

In addition to being aware of scams, lenders and mortgage companies
said communication is a key to avoiding foreclosure and credit
problems. Said Knob: “My view would be to contact a local company that would have your best interests in mind.”

Troester said people should be leery anytime someone advises them to
delay payments and also advises that credit scores won’t take a hit.
“If you don’t make your payments, your credit is not fine,” she said.
“For whatever reason, people will hear something like that (that their
credit won’t be affected by failure to pay) and believe it,” she added.
“I don’t know if they believe it because it sounds easy. We’re
accountable for debt.” (The three credit bureaus have since incorporated a new classification for mortgage modifications so that credit doesn’t suffer after a mortgage modification.)

Reece said: “Everything should be in writing. Verify everything.”
Reece said people investigating a loan modification program have the
option of checking with such public agencies as the Grand Junction
Housing Authority or calling the Colorado foreclosure hotline telephone
number.”

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Originally posted 2009-12-16 00:48:26. Republished by Blog Post Promoter

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