CT Bans Upfront Fees, Limits Fees to $500

September 28, 2009

Connecticut State Banking Commissioner Howard Pitkin today issued a schedule of the maximum fees that a debt negotiator may charge for specific services pursuant to section 32(b) of Public Act 09-208. The legislation, An Act Concerning Consumer Credit Licensees, makes a number of changes regarding consumer credit licensees.

The act expands upon the definition of a licensed debt adjuster to include for-profit entities.  It defines debt negotiation, which includes debt settlement, foreclosure rescue, and short sales, and creates a new license for debt negotiators that tracks the same licensing requirements as debt adjusters with regard to application procedures, requirements, and enforcement.  The act also imposes additional consumer protection requirements upon all debt adjusters.

“In preparation for this law taking effect, the agency has put together this release to inform the industry of their new responsibilities,” commented Commissioner Pitkin. “It is important to note that as of October 1, it will be a violation of state law to provide certain debt negotiation services, including debt settlement, loan modifications and foreclosure rescue, without a license.”

Information and applications for companies seeking to obtain the debt negotiation license is available on the Department of Banking’s website, at www.ct.gov/dob, or by calling the Consumer Credit Division, at 860-240-8200, or toll-free 1-800-831-7225.

Additionally, if you are a Connecticut resident that is dealing with a debt adjuster or debt negotiator, please contact the Department of Banking to find out if the company or individual is licensed. 

The following are the maximum fees that debt negotiators may charge for their services:

INITIAL FEE:
A debt negotiator of unsecured debt may charge the debtor a reasonable one-time initial or set-up fee in an amount not to exceed fifty dollars ($50).

SERVICE FEES:
A debt negotiator of unsecured debt may charge a monthly service fee not to exceed eight dollars ($8) for each creditor that is listed in the debt negotiation service contract.  The total service fee charged to a debtor may not exceed forty dollars ($40) per month.

AGGREGATE FEES
A debt negotiator of unsecured debt may collect total aggregate fees including the initial fee and service fees, not to exceed ten percent (10% ) of the amount by which the consumer’s debt is reduced as part of each settlement as agreed to in the debt negotiation service contract as each settlement is achieved.  A debt negotiator may not charge more than ten percent (10%) of the amount by which the consumer’s debt is reduced on the basis that the consumer has entered into a debt negotiation contract for joint obligations of a consumer and a consumer’s spouse or other member of the consumer’s household.

DEBT NEGOTIATORS OF SECURED DEBT
A debt negotiator of secured debt, including Short Sales and Foreclosure Rescue Services, may impose a fee upon the mortgagor or debtor for performing debt negotiation services not to exceed five hundred dollars ($500).  Such fee shall only be collectable upon the successful completion of all services stated in the debt negotiation service contract.  Nothing herein shall prohibit any person from receiving compensation from the mortgagee or its assignees.

“I am hopeful that this information will prove useful to the industry and the citizens of Connecticut,” concluded Commissioner Pitkin. “If you have any additional questions related to this new law, please contact the Department of Banking at 1-800-831-7225 and we will do our best to assist you.”

Cal Bar Publishes Shame List of Mod Attorneys

The Cal Bar sent out the below press release shaming attorneys for collecting money from homeowners and then not getting them a modification.   There are some interesting names on it like Gregory Paiva who was once tight with our favorite covicted drug trafficker and wife beater turned mod company operator Moe Bedard.   There are also a few attorneys from United Law Group, who actually threatened to sue MFI-Mod Squad because they were put on MFI-Mod Squad’s 20 Worst Mod Company list back in April. 

San Francisco, September 18, 2009 — The State Bar of California, alarmed by the number of lawyers preying on vulnerable homeowners, today identified 16 attorneys who are under investigation for misconduct related to loan modification.

“In my 21 years in attorney discipline, I have not seen a crisis of this magnitude. It is truly unprecedented,” said Interim Chief Trial Counsel Russell Weiner, who is waiving investigation confidentiality in favor of public protection. The waiver, allowed by law, is used only occasionally, but Weiner said the seriousness of the problem demanded a strong reaction by the bar in order to protect consumers. This is the first time the names of more than a few lawyers being investigated have been made public.

 “The number of attorneys using their law licenses to essentially take money from unwary but trusting consumers is astounding,” Weiner added. “There are literally thousands of victims who have lost money they could not afford to lose. Under the circumstances, the need for public information and protection is paramount.”   

Those attorneys being named by the State Bar have allegedly taken fees for promised services and then failed to perform those services, communicate with their clients or return the unearned fees, Weiner said. Some attorneys misrepresented the services they could provide. “It appears these attorneys may have significantly harmed their clients who were already facing great financial pressure and the possible loss of their homes.”

 About one-quarter  – almost 800 cases –  of the active investigations in the Office of Chief Trial Counsel (OTC) are related to foreclosure complaints. The office has experienced a 58 percent increase in active investigations over 2008 due in large part to the huge increase in complaints against attorneys offering loan modification services. “Our office is aggressively investigating these cases and is working proactively with law enforcement,” said Weiner.

 In March of 2009, the State Bar created a special team of investigators and lawyers to handle the growing number of complaints received about attorneys offering loan modification services. OTC found that many of the offending attorneys are associated with firms that use telemarketers or phone banks to sign up clients without regard to the facts of the individual case or whether or not the client can be helped, Weiner said.

In many cases, the attorneys work with untrained non-attorney staff engaging in the unlawful practice of law by offering legal advice to prospective clients. OTC also is investigating the non-attorney staff for possible referral to law enforcement.

 In recent months, OTC has obtained the resignation of three attorneys who were offering loan modification services. Those attorneys chose to give up their licenses to practice law rather than face disciplinary charges and possible disbarment. In addition, OTC lawyers are preparing to put some attorneys on inactive status pending the filing of formal disciplinary charges

Weiner warned consumers to take special caution when seeking legal representation related to loan modification. “Consumers should not be comforted by advertisements that claim the attorney is a member of the State Bar of California,” he said, noting that all attorneys practicing in California on a regular basis are members. “Such membership does not mean the attorney has any special knowledge, experience or expertise in the area of loan modification. In fact, it appears that many of the attorneys offering these services have little or no prior experience in the area of loan modification.” 

 The following attorneys have received a significant number of complaints related to the loan modification services they were hired to perform. They are entitled to a full and fair hearing on any charges that may be filed in the future. No discipline may be imposed unless and until the State Bar proves allegations of misconduct by clear and convincing evidence. 

• David Arase, Bar No. 233705, Arase Law Firm and National Housing Assistance
• Stephen Burns, Bar No. 113371, Legal Group Network
• Robert Buscho, Bar No. 122556, United Law Group
• Nicholas Chavarela, Bar No. 251632, Rodis Law Group and America’s Law Group
• Steven Feldman, Bar No. 103676, Feldman Law Center
• Steven Feldman, Bar No. 224065, Avantgarde Group
• Paul Lucas, Bar No. 163076, Lucas Law Center
• Brandon Moreno, Bar No. 233750, U. S. Foreclosure
• Jeffrey Nemerofsky, Bar No. 213014, U.S. Advocacy Law Group and U.S. Financial Products
• Gregory Paiva, Bar No. 207218, Law Offices of Gregory Paiva
• Adrian Pomery, Bar No. 249664, U.S. Foreclosure
• Ronald Rodis, Bar No. 181873, Rodis Law Group and America’s Law Group
• Mark Shoemaker, Bar No. 134828, Advocates for Fair Lending
• Marc Tow, Bar No. 78429, Marc Tow and Associates
• Michael Yellin, Bar No. 255050, A Fresh Start Loan Modification
• Sean Rutledge, Bar No. 255938, United Law Group

The State Bar suggests that consumers be wary of attorneys offering loan modification services under any of the following circumstances:

• Advertisements of the office do not expressly identify by name the attorney who is responsible for the business.
• Office staff will not readily identify by name the attorney responsible for oversight of the business.
• The attorney in charge of the office is too busy or not willing to meet personally with prospective clients.
• The firm advises a consumer to stop paying the existing mortgage.
• The business, through its advertisements or claims of its representatives, makes  claims that sound too good to be true, such as claims of a 90 or 100 percent rate of success in obtaining loan modifications, or claims that a reduction in the mortgage principal is likely to be achieved. 
• The business demands payment of a large fee, even before obtaining a prospective client’s basic income and expense information, and information about the existing mortgage and present home value.
• The attorney responsible for the business is not licensed to practice law in the state where the consumer resides.

 There are legitimate loan modification services and ethical attorneys that are providing the promised services for their clients. Two places to start in the search for loan modification assistance are: HUD Housing Counselors, 800-569-4287, http://www.hud.gov/counseling; and HOPE NOW, 888-995-HOPE, http://www.hopenow.com. 

 Consumers can also find qualified attorneys through a State Bar-certified lawyer referral service that can be found on the State Bar’s Web site (www.calbar.ca.gov), or by calling the State Bar’s Lawyer Referral Services Directory at 1-866-442-2529 (toll free in California) or 415-538-2250 (from outside California).

Consumers having a problem with the attorney handling their loan modification may contact the State Bar at 1-800-843-9053 or visit the State Bar’s Web site at www.calbar.ca.gov to find a complaint form.

FOX 5 in NY Nails The Scumbags At Amerimod

Hopefully Andrew Cuomo can throw these guys behind bars soon. 

See the piece here:

http://www.clipsyndicate.com/video/play/1098979/foreclosure_rescue_company_lawsuits

Why Is HAMP Not Working?

Great interview Brian Lehrer from WNYC did about HAMP and modifications.

http://www.wnyc.org/shows/bl/episodes/2009/09/15/segments/140724

Geithner Again Pledges to Crack Down On Mod Scams

The Washington Post is publishing an article in Friday’s edition about how the US Treasury is pledging to end housing scams.  This sounds vaguely like the press conference he gave back in the spring pledging the same thing except this time he met with the AGs from various states who have had success in cracking down on foreclosure rescue and modification scams.

Administration Pledges to End Housing Scams

By Renae Merle

Washington Post Staff Writer
Friday, September 18, 2009

The Obama administration vowed Thursday to squash scams targeting homeowners on the brink of foreclosure, reviving a five-month-old pledge as millions of borrowers remain at risk of losing their homes.

A group of high-ranking government officials, including Treasury Secretary Timothy F. Geithner, Attorney General Eric H. Holder Jr. and attorneys general from 12 states, met privately in Washington on the issue. It was a first meeting of its kind on the matter for federal and state authorities, who discussed methods for coordinating crackdown efforts, government officials said.

The discussions come as a growing number of companies are offering to help troubled borrowers work out deals with lenders, sometimes charging thousands of dollars in upfront fees. Lenders and consumer advocates complain that the firms are charging for a service that can be obtained free through a housing counselor. Federal officials say the services often do not bring results and, in some cases, are outright scams.

“A clear lesson of this financial crisis is that American consumers need better protection against fraud,” Geithner said in a statement. “And while we will prosecute anyone who violated the law, going forward we will not wait for problems to peak before we respond.”

Read more or the article here:

http://www.washingtonpost.com/wp-dyn/content/article/2009/09/17/AR2009091703397.html?hpid=moreheadlines

FTC May Ban Upfront Payments For Loan Mods

Our friends at the thetruthaboutmortgage.com posted the following article:

The head of the FTC is considering a nationwide ban of upfront payments to companies that advertise help to borrowers behind on their mortgages, according to the AP.

FTC Chairman Jon Leibowitz said scammers often charge $1,000 to $3,000 in upfront fees in exchange for assistance that rarely pays off, or accomplishes nothing beneficial at all.

“Today’s challenging economy presents an opportunity for con artists who prey upon financially distressed consumers. The Federal Trade Commission and our state and federal partners will continue to bring law enforcement actions to stop this insidious fraud,” said Leibowitz, in a release.

 “If you’re worried about keeping your home, avoid any company that asks for a large fee in advance, guarantees that they’ll stop a foreclosure or modify a loan, or tells you to stop paying your mortgage company and to pay them instead.”

Upfront fees are already banned in 20 states; 12 state AGs met with U.S. Attorney General Eric Holder, Treasury Secretary Timothy Geithner, and HUD Secretary Shaun Donovan today to discuss anti-fraud operations.

The FTC also announced two new law enforcement actions against foreclosure rescue and loan modification companies, including “Nations Housing Modification Center” and “Infinity Group Services.”

Both offered assistance in exchange for an upfront fee; the Commission has filed 22 of these cases since the housing crisis began, a number that seems low considering the related carnage.

New Cal Bar Chief To Persue Shady Loan Mod Attorneys

Los Angeles attorney Howard Miller lambastes lawyers who claimed to be offering help to homeowners facing foreclosure but did nothing except take their money.

 By Carol J. Williams

September 14, 2009

 Crooked lawyers have long besmirched the profession’s image, but the scale of their involvement in the loan modification scandals plaguing California homeowners has taken an unprecedented toll, the incoming president of the State Bar of California says.

The proliferation of complaints against lawyers who said they could help rescue clients threatened with foreclosure has hurt tens of thousands of people and confronted the bar with….

http://www.latimes.com/news/local/la-me-state-bar-miller14-2009sep14,0,5317755.story

Wells Fargo Exec Gets Sacked For Livin’ Large In Malibu

Wells Fargo announced they have fired Cheronda Guyton after the LA Times article last week of how she was livin’ large at a home that may or amy not have belonged to Wells Fargo.  The home was apparently turned over to Wells Fargo as a payment of debt by it’s previous owner.

See the story here:

http://www.huffingtonpost.com/2009/09/14/cheronda-guyton-wells-far_n_286682.html

Wells Fargo Exec Livin’ Large At Foreclosed Ocean Front Malibu Mansion

This story was in the LA Times on Friday.   It’s apparent John Stumpf needs to reign in his executives. 

Wells Fargo exec used Malibu Colony home lost by Madoff-duped couple, neighbors say

A top bank executive was seen spending weekends and hosting parties in the $12-million beach house. The bank says it will ‘conduct a thorough investigation of the allegations’ by neighbors.

By E. Scott Reckard and David Sarno

September 11, 2009 

Bernard L. Madoff’s massive fraud stunned some of the wealthy denizens of Malibu Colony, especially when a couple devastated by the scheme surrendered their oceanfront home to Wells Fargo Bank.

But some neighbors say the real shocker came when they saw one of the bank’s top executives spending weekends in the $12-million beach house and hosting eye-catching parties there. What’s more, Wells Fargo spurned offers to show the property to prospective buyers, a real estate agent said.

“It’s outrageous to take over a property like that, not make it available and then put someone from the bank in it,” said Phillip Roman, an 18-year Colony resident who lives a few homes away from the property.

Residents identified the house’s occupant as….

http://www.latimes.com/business/la-fi-malibu-wells11-2009sep11,0,1323579,full.story

Foreclosure Rescue Fraudster Get Taste of Texas Justice By Getting 350 Months in Big House

By Guillermo Contreras

A San Antonio woman who defrauded several people out of more than $70,000 in foreclosure-rescue scams got a hard lesson Friday.

After reportedly telling a victim a Spanish phrase along the lines of “Payback’s a (expletive),” Rosario Castro Divins was sentenced to nearly 30 years in prison for her scams, the comment and misbehaving in jail.

The comment came during a break in Divins’ trial in June, and its recipient — one of her fraud victims — took it as a threat, the victim and a witnesses testified Friday.

The 350-month sentence imposed by U.S. District Judge Fred Biery was an exclamation point on a case that screamed….

http://www.mysanantonio.com/news/local_news/59061852.html

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