It’s no doubt that scammers took the housing crisis as a prime opportunity to pounce on struggling homeowners looking for loan modifications. Numerous scammers offered “easy” loan modifications and “foreclosure counseling” and then quickly sped to the bank to cash the checks of distressed consumers.
California’s amount of real estate scams were so rampant, and according to Tom Pool, spokesman for the California Bureau of Real Estate, “The amount of fraud that was occurring in the loan modification sector was unprecedented.” He went on to say, “So many were fly-by-night operators who would take consumers’ money upfront and then disappear … It was the Wild West.” Between 2009 and 2011, California was facd with more than 1,100 loan modification scammers. Enforcement efforts helped quell the problem by making it illegal for people to collect upfront fees for promises of loan modifications. And luckily, that has decreased the problem significantly. “We’re not receiving nearly as many complaints on loan modification scams. They’re very infrequent.” He recalls just five years ago, the city was receiving “hundreds and hundreds of complaints” every year.
Still an Issue
Though loan modification scams have decreased, they recently returned to the news as the Federal Trade Commission and the Consumer Financial Protection Bureau in Washington, D.C., jointly announced a nationwide crackdown. A handful of law firms, companies, as well as individuals have been accused of collecting illegal fees from struggling homeowners – more than $25 million in illegal fees. And amongst those accused, are two Southern California firms, Siringoringo Law Firm and Clausen & Cobb Management Company. Principals of the companies have been accused of partnering on schemes to charge homeowners will illegal upfront fees. According to the CFPB, thousands of Southern Californians were schemed into paying upfront fees between $1,200 and $3,500, as well as $495 monthly fees.
“These companies pocketed illegal fees – taking millions of hard-earned dollars from distressed consumers, and then left those consumers worse off than they began,” said CFPB Director Richard Cordray. “These practices are not only illegal, they are reprehensible.”
In 2013, California extended a ban on requesting upfront fees for promised loan modification services through 2016. If you find you are struggling to make your mortgage payments, it’s advised that you contact your mortgage lender. Quite often your lender will be willing to negotiate a plan to help you become current. If that does not work, you should seek help from HUD-certified housing or a “foreclosure avoidance” counselor. Remember that it is illegal for a company to request upfront fees.