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Mon May 21, 2012
Four fair housing organizations have released their findings of a year-long undercover investigation of 80 loan modification companies, which reveal a host of corrupt practices scammers employ to target homeowners in distress.
The National Fair Housing Alliance (NFHA), the Connecticut Fair Housing Center, Housing Opportunities Made Equal of Virginia, Inc., and the Miami Valley Fair Housing Center issued the report.
Their analysis uncovered common tactics used by scammers to steal money from homeowners. According to the report, 55 percent of loan modification companies required an upfront fee to start work or a low initial fee to conduct minimal work on behalf of distressed homeowners, such as reviewing loan documents.
Some 43 percent guaranteed or promised they could secure a loan modification before learning about the homeowner’s financial limitations, and 24 percent advised or encouraged homeowners to stop making mortgage payments or stop contacting their lenders.
The report also revealed that 16 percent of loan mod companies guaranteed a much lower interest rate ranging between 2 and 6 percent on modified loans. While 12 percent discouraged homeowners from seeking free help from government-approved housing counseling agencies, 8 percent encouraged providing fraudulent information to lenders.
“This is shameful abuse by loan modification scammers to take advantage of desperate homeowners,” said Shanna L. Smith, NFHA president and CEO. “We and our partner organizations will work to see to it that these companies are prosecuted by the Federal Trade Commission and other federal and state enforcement agencies.”
In a statement, the fair housing organizations asked the financial services industry to recommit itself to providing sustainable loan modifications.
They request that the Federal Trade Commission strengthen its mortgage assistance relief services (MARS) rules to prohibit upfront fees for all loan modification companies, including law firms. They also call for strengthened enforcement and education efforts by the federal government.
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