Trial Loan Mods Hurt Credit Score

NEW YORK (CNNMoney.com) — Most troubled homeowners view President Obama’s foreclosure rescue plan as a way out of their financial troubles.

But many don’t realize that entering a trial mortgage modification can actually hurt their credit.

CNNMoney recently received a flood of e-mails from readers complaining about the impact of trial modifications on their credit reports.

To be sure, many people who apply for the president’s plan are already delinquent in their mortgage payments, which wrecks their credit backgrounds. And obtaining a trial modification should affect borrowers’ scores because it shows they cannot meet their original obligation, experts said.

But being in a months-long trial period may only add to the pain.

Jason Axelrod learned that the hard way.

Axelrod, a municipal employee who lives outside Chicago, entered a trial mortgage modification program this spring.

He had not fallen behind in his mortgage, but he was finding it harder to make ends meet after his overtime was cut and his property taxes skyrocketed. Told it would not hurt his coveted 750 score, Axelrod secured a $565 reduction in his monthly payments.

Eight months later, Axelrod is still stuck in the trial modification, trying to satisfy his loan servicer’s endless requests for documents.

And to his horror, his credit score has plummeted to 644.

“It’s completely destroyed my credit,” said Axelrod. “If I had known it would affect my score, I would have never entered the program.” (Read more)

MFI-Mod Squad was featured in the South Florida Business Journal

Florida cracks down on loan modification firms

South Florida Business Journal – by Susan R. Miller

The days of simply hanging out a shingle and opening up a loan modification business are coming to an end in Florida.

As of Jan. 1, individuals or companies providing loan modification services must be licensed by the Florida Office of Financial Regulation (OFR).

Florida Bar Continues Crackdown On Attorney/Mod Company Partnerships

By Diane C. Lade, South Florida Sun Sentinel

 A Coral Springs lawyer is being investigated by the Florida Bar Association for her involvement with a South Florida foreclosure rescue company, as trade regulators continue to file actions against attorneys involved in similar operations.

Bar officials confirmed they are investigating Karen Grun and her ties to Housing Assistance Law Center, of Deerfield Beach. The Florida Attorney General’s Office filed legal action against the company and three afilliates in July, claiming they illegally took payments in advance and, in some cases, guaranteed a mortgage could be modified in 30 to 60 days.

The bar has increasingly scrutinized partnerships between lawyers and foreclosure rescue firms, concerned the relationships were forged to skirt state laws barring upfront fees for loan modification work. The professional association, which monitors and disciplines lawyers, opened 195 cases regarding foreclosure rescue practices this year

“They’ve really put a lot of heat on attorneys who were doing this,” said Susan Spurgeon, a Tampa real estate lawyer who has lectured on mortgage modification.

Grun did not return phone messages the Sun Sentinel left at her home and office.

Aventura real estate lawyer Daniel Henry Fox was disbarred, following an investigation, in October after he allegedly? abandonned some of his residential loan modification clients. His office phone has been disconnected and an e-mail from the Sun Sentinel was not returned.

Grun’s name and the phrase “a private law firm” were on Housing Assistance Law Center documents, and state corporate records listed her as the center’s director/president from April through June. Housing Assistance since has been dissolved and it’s telephone number has been disconnected. (Read more)

FL AG Files Suit Against 3 Shady Mod Companies And Their Attorneys

Attorney General Bill McCollum today announced he has filed a lawsuit against three businesses operating in Miami-Dade County, their principles and affiliated attorneys on allegations of deceptive and unfair trade practices regarding their involvement in a foreclosure rescue scam affecting homeowners nationwide. The Attorney General’s Economic Crimes Division began investigating Kirkland Young LLC, in July after receiving numerous consumer complaints against the company. During the course of the investigation it was discovered that Attorney Aid LLC and ABK Consultants were affiliated with Kirkland Young LLC.

The companies allegedly charged up-front fees for loan modification services, and misrepresented to consumers that lenders required “qualifying payments” in order to qualify for modifications. The companies also charged “back end” fees upwards of $1,299 for the first mortgage modification and approximately $499 to $699 for a second mortgage modification. To facilitate the collection of additional fees, consumers were required to set up escrow accounts with the attorneys affiliated with the companies, misleading consumers into believing they were retaining attorney representation for their loan modification. The funds fraudulently collected in the attorney escrow accounts were used for the benefit of all the defendants.

The Attorney General’s lawsuit seeks a permanent injunction prohibiting defendants from engaging in any business activity generally dealing in or related to the residential and commercial real estate businesses, restitution on behalf of all victimized consumers, civil penalties in the amount of $10,000.00 for each violation of the Deceptive and Unfair Trade Practices Act and reimbursement for attorneys fees and costs related to the investigation.

A copy of the complaint is available online at: http://myfloridalegal.com/webfiles.nsf/WF/MRAY-7YXQF7/$file/Complaint.121709.pdf

Homeowners often rejected under Obama’s loan plan

WASHINGTON — Ten months after the Obama administration began pressing lenders to do more to prevent foreclosures, many struggling homeowners are holding up their end of the bargain but still find themselves rejected, and some are even having their homes sold out from under them without notice.

These borrowers, rich and poor, completed trial modifications of their distressed mortgage, and made all the payments, only to learn, often indirectly, that they won’t get help after all.

How many is hard to tell. Lenders participating in the administration’s Home Affordable Modification Program, or HAMP, still don’t provide the government with information about who’s rejected and why.

To date, more than 759,000 trial loan modifications have been started, but just 31,382 have been converted to permanent new loans. That’s averages out to 4 percent, far below the 75 percent conversion rate President Barack Obama has said he seeks.

In the fine print of the form homeowners fill out to apply for Obama’s program, which lowers monthly payments for three months while the lender decides whether to provide permanent relief, borrowers must waive important notification rights.

This clause allows banks to reject borrowers without any written notification and move straight to auctioning off their homes without any warning.

That’s what happened to Evangelina Flores, the owner of a modest 902 square-foot home in Fontana, Calif. She completed a three-month trial modification, and made the last of the agreed upon monthly payments of $1,134.60 on Nov. 1. Her lawyer said that in late November, Central Mortgage Company told her that it would void her adjustable-rate mortgage, which had risen to a monthly sum above $2,000, and replace it with a fixed-rate mortgage. (Read more)

87 Year Old Woman Gets Money For Her Stolen Home

By JAMES ELI SHIFFER, Minneapolis Star Tribune

An 87-year-old woman who was cheated out of her home of 50 years will receive $116,972 from the state, the largest pay-out in recent memory from a fund for victims of unscrupulous real estate professionals.

Telsche Paulson’s compensation from the Real Estate Education, Research and Recovery Fund was approved Wednesday by Hennepin County District Judge Susan Burke after Paulson’s lawyers and the state Department of Commerce reached an agreement on her claim.

The ruling is a milestone in Paulson’s long and frustrating legal journey, at a time of life that she expected to spend in comfortable retirement.

“I was happy that they decided to come through for me,” she said Thursday.

But the loss still hurts. She now lives with her son in a rented house in Farmington, far from the south Minneapolis duplex she lived in from 1958 to 2008. “This house isn’t like mine,” Paulson said. “It’s different.” (Read more)

Ohio AG File Deceptive Practices Suit Against HomEq

Ohio Attorney General Richard Cordray today announced a lawsuit filed against Barclays Capital Real Estate dba HomEq Servicing, headquartered in New York, for issuing unfair loan modification agreements and providing inadequate, incompetent customer service to Ohioans who were at risk of losing their homes to foreclosure. HomEq is a participant in the federal Home Affordable Modification Program (HAMP).

According to the lawsuit filed today in Montgomery County Common Pleas Court, Ohio homeowners in need of loan modifications through HomEq to save their homes from foreclosure were forced to enter into one-sided agreements. The unfair and deceptive agreements released HomEq of all liabilities and required borrowers to waive their rights to defenses and agree to pay additional fees.

Additionally, the lawsuit alleges that HomEq violated Ohio’s Consumer Sales Practices Act (CSPA) through incompetent and inefficient customer service by failing to return consumer calls or respond to repeated inquiries, losing borrowers’ documents and failing to offer timely and affordable loss mitigation options.

“There has been ample time for loan servicers to strengthen their efforts and start making a significant difference in preventing home foreclosures,” said Cordray. “Unfortunately, many servicers have instead repeatedly chosen to aggravate the crisis through noncompliance and excuses. As I see it, for every excuse, hundreds of families become more vulnerable to losing their homes. In Ohio, we have zero tolerance for any more excuses.”

Today’s lawsuit seeks a permanent injunction from the continuation of unfair and deceptive loan modification practices as well as consumer restitution, civil penalties and damages.

HomEq services more than 10,000 subprime loans in Ohio and became a HAMP participant in August. According to the December Servicer Performance Report issued by the U.S. Treasury, it is one of the lowest performing servicers in terms of loan modifications initiated. 

The lawsuit against HomEq marks the third filed by Cordray against a loan servicer operating in Ohio. In July, Cordray became the first state attorney general to file a lawsuit against a servicer for CSPA violations. That lawsuit, filed against Carrington Mortgage Services, is pending in the Franklin County Court of Common Pleas. Carrington recently issued its third, 60-day moratorium on home foreclosures in response to the lawsuit.

On Nov. 5, 2009, Cordray filed a lawsuit against American Home Mortgage Servicing Inc. for numerous CSPA violations including issuing unfair or deceptive loan modifications to Ohioans. The case is currently pending in Cuyahoga County Common Pleas Court.

Cal Bar Encourages Parsa Clients To File For Restitution

Michael Finney, KGO-San Francisco – Thousands of distressed homeowners are looking for a way to get their money back after hiring a lawyer to save their homes.

 The families were left in a lurch when the lawyer suddenly resigned from the State Bar. But even before his resignation, investigators were raising questions about whether the attorney was doing more harm than good.

James Parsa advertised heavily on both television and radio up and down the state.

James Anderson signed a contract with Parsa and paid $3,500 up front to get a loan modification.

“What I got for my money was a big headache,” said Anderson.

Jeanine Barajas paid an advance fee of $5,000 for the same thing.

“I wouldn’t do it again if that’s what you mean,” she said.

The California State Bar told 7 On Your Side Parsa was one of 300 lawyers under investigation.

“Mr. Parsa was being investigated for his loan modification activities by the State Bar based on complaints we have received from clients. And as part of our investigation we learned that Mr. Parsa had a criminal conviction in 2001,” said Suzan Anderson from the California State Bar.

(Read More)

Maine targets 19 Out-Of-State Mod Companies

AUGUSTA, MAINE — Attorney General Janet Mills today joined the Federal Trade Commission, the U.S. Department of Justice and the attorneys general of twenty-six other states in a national crackdown against foreclosure rescue and mortgage modification operations. These companies prey on consumers who are desperate to save their homes from foreclosure.

The Maine Attorney General has filed three separate lawsuits in Kennebec County Superior Court against three out-of-state businesses and their principals. The defendants are: Elect Group, LLC, Anthony Ferlanti and Emmanuele Zuccarelli (Florida); Help Modify Now Debt Solutions, Inc., Help Modify Now, Inc. and Chas Bain (California and Nevada); and US Advocate Law Group, P.C. and Jeff Nemerofsky (California). These lawsuits allege that the defendants used deceptive and unfair practices in marketing so-called “debt settlement” services, in the form of foreclosure rescues and mortgage modifications, and that they failed to register as debt management services under Maine law. The suits seek the recovery of fees paid by Maine consumers to these defendants, as well as civil penalties and costs.

“A person’s home is not just their largest financial asset; it is the bedrock of their family, their anchor in the community, their children’s future and their legacy. These foreclosure rescue schemes take advantage of people threatened with foreclosure by demanding large upfront fees and doing little or nothing in return,” said Attorney General Mills.

“I am pleased to join a national effort to protect homeowners from unfair and deceptive practices. Maine homeowners need to know that there is legitimate help for those concerned about foreclosure. I encourage Maine consumers to talk to Maine registered non-profit counselors and to avoid paying fees to any entity without checking the state’s registry. Many times a homeowner can negotiate on their own without paying any fees to a debt management company. The money spent on these ‘debt solution’ services is better spent on paying down debt and negotiating with banks and other creditors,” Mills stated.

The three lawsuits follow investigations conducted by staff in the Attorney General’s Office and at the Bureau of Consumer Credit Protection within Maine’s Department of Professional and Financial Regulation, which licenses debt management service providers.

The defendants allegedly charged Maine consumers more for their debt settlement services than allowed for by Maine law. The State alleges that the defendants’ illegally high upfront charges ranged from $1,000.00 to $4,300.00. Maine law prohibits debt management service providers from charging more than a $75 set-up fee and for charging more than 15% of the amount by which the consumer’s debt is reduced as part of each settlement. The State also alleges that the defendants misrepresented the benefits of their programs to consumers and refused to provide refunds when consumers asked for them after the defendants failed to prevent foreclosure. As a result, many Maine consumers found themselves in more dire financial straits than they were before they engaged the defendants. .

Maine’s Debt Management Services Act requires that providers of debt management services register with the Superintendent of the Bureau of Consumer Credit Protection and obtain a $50,000 surety bond for the protection of consumers. The defendants named in the recent lawsuits have never registered nor have they procured the required surety bond.

Superintendent Will Lund of the Bureau of Consumer Credit Protection stated that his agency has filed Cease & Desist Orders against 19 separate unlicensed debt management providers in the past 6 months, and that his staff has recovered more than $25,000 in restitution for Maine consumers during that time.

Lund cautions consumers who are considering hiring a debt management provider to review the roster of registered companies found on the agency’s website, www.Credit.Maine.gov, or to contact the Bureau at 1-800-332-8529 (1-800-DEBT-LAW) to make sure that the provider is properly registered.

“We hear every week from consumers who have found unlicensed companies on the Internet and who have sent funds to those companies without receiving any benefit,” Superintendent Lund commented. “We will continue to work with the Attorney General and other partners to stop violations of laws and to protect the public,” he said.

AG Mills and Superintendent Lund advise homeowners facing foreclosure that they now have a right to mediate with their lenders during the court proceedings. Homeowners should not hesitate to ask for mediation; this is an informal opportunity to resolve a foreclosure problem under the guidance of a court-approved mediator.

Missouri AG Files Lawsuit Against First Universal Lending

Jefferson City, Mo. – Attorney General Chris Koster said today he is suing a Florida company that took money from distressed Missouri homeowners without providing any meaningful mortgage-modification service. Koster joined the Federal Trade Commission and the state of Iowa in taking legal action against the company.

This represents the eighth lawsuit against a fraudulent mortgage business since Koster began his campaign against mortgage fraud in April.

“This Attorney General’s office has instituted a zero tolerance policy for any mortgage modification firm that preys on and cheats desperate homeowners,” Koster said. “Our office will use all its powers to investigate and prosecute businesses involved in these foreclosure rescue schemes to defraud Missouri consumers.”

Koster said First Universal Lending, LLC, is based in Palm Beach Gardens, Florida, but transacts business throughout Missouri. He said the company markets its services to homeowners who are having difficulty paying their mortgages or facing foreclosure, promising them lower house payments or lower interest rates. In reality, the company appears to do little or nothing for most of its customers.

In addition, company representatives told some clients to stop making mortgage payments while the modification process was proceeding, which harms consumers by injuring their credit rating and resulting in higher late fees, penalties, and interest payments, as well as increased likelihood of foreclosure.

Koster said the business required people to pay up-front fees before they would provide any services, which is illegal for mortgage modification companies in Missouri.

Koster’s “zero tolerance” campaign against mortgage fraud in Missouri has resulted in eight lawsuits since April, with a number of additional official investigations currently underway.

Koster is asking the court to award restitution to consumers who suffered losses; impose appropriate monetary penalties; and issue preliminary and permanent injunctions prohibiting First Universal from violating Missouri consumer protection laws in the future.

Koster’s announcement today is part of a nationwide “sweep” on mortgage scams, called “Operation Stolen Hope.” The nationwide sweep is coordinated by the Federal Trade Commission, the U.S. Department of Justice, and 20 other states.

The Attorney General urges consumers who have been the victims of fraudulent mortgage-refinancing or foreclosure-relief companies, or who are concerned about the practices of their lender, to contact his consumer hotline at 800-392-8222 or to go online at ago.mo.gov

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