Even the notoriously slow Nevada legislature sped through a law requiring anyone "conducting loan modification and foreclosure consulting activities" to be licensed by the state. Yet there will be plenty of folks who still get ripped off.

[mld.nv.gov]

Heart rending what these douche nozzles are doing to desperate homeowners. If you are an attorney involved with people like this , I ask you : Is this what you went to law school for ? All the hard work , the studying , the financial sacrifice , for this ? Do you see how this could possibly make the public distrust you even more than it does now ?

I hope that California and the other 49 states make ANY up front fees for loan mods (even to attorneys) illegal.The fact is ,if there is the barest hint of a loophole in the law , these scum will plow right through it.

If they call you, or knock on your door, you don't want it.

Lwyrs bng scmbgs? Ths s nws?

Did anyone else immediately think of that Family Guy where Kate Moss slips through the floorboards?

@Snarkysnake: Yes, there are just as many douchebags and scumsuckers in the legal industry as the rest of the populace. But people LOVE to point it out when they are lawyers in order to malign the entire profession.

ok,first off, this doesnt really qualify as a 'scam'. What they are telling telling this consumer is true.

i tried modifying my loan - we applied in march. its the end of july, and we've heard nothing, despite being promised that we'd have a decision in 6 - 8 weeks. i had gone through a legitimate credit counseling agency - the one my bank who holds my mortgage recommended. When i called back in June, the counselor said, its probably b/c we were still paying our mortgage (as the bank asked us to!). She 'unofficially' suggested that they would pay more attention to those who cant make their mortgage payments. I asked a friend of mine who is an attorney, and he agreed.

@grebby: Same in Maine :).

I'm consulting with a loan modification company based in Metro Detroit that is legitimately helping people. The man who runs it is a really good guy who enjoys helping people save their homes. They are for profit, but definitely don't rip people off.

However, when we were looking at the competition for a business plan we found many companies that are not helping people. Places like FedMod.com, which was just shut down by the government, will rip off desperate homeowners. Be wary of the many shady companies out there. A little searching on Google will quickly turn up any complaints against a company. If you find any that seem at all legit, move on to the next company. But don't write off all for profit companies either, some really can help you out.

Also, there are a whole series of options for homeowners in trouble. First you can refinance, then try a forensic loan audit, then a loan modification, then if those fail you can look at a short sale, deed-in-lieu, cash for keys, or a walkaway plan. The last few involve losing your home but try to minimize how much that process sucks.

Also, sometimes if they call you, you do want it. lenders outsource modifying loans to other companies. They will call you up and try to offer you a lower payment or modified mortgage rate that is pre-approved by the lender. One of the biggest challenges for lenders is that people with money trouble won't answer the phone and talk to them because they are afraid of debt collectors and people that are after them for money. Sometimes lenders will have 1,000 homeowners they reach out to, with loan modifications already approved, and only 50-100 will bother to take the call and find out they are being offered a loan modification.

I would never expect anything better from a lawyer. They are the maggots who become politicians.

@kevinhall:

Acid test: Does your company require funds up front ?

If so, what incentive does your company have to achieve success for the client after you are paid ?

Not trying to be snarky here , but I am genuinely curious how hard a mod company can work when the money is on the front end instead of the back end.

@bobloblawsblog: This is true, to a point. Mortgage companies are out to make money. If they modify your loan, they lose (some) money. If your loan is current, you don't need help as badly as someone who's 3+ payments behind, or in foreclosure.

I don't know if scam is the right word, but i work in default for a mortgage company, and i rarely see these companies do anything that helps customers. Often they charge fees for doing things customers could easily do themselves, they create delays in communication between the mortgage company and the customer, they advise customers not to take plans and hold out for something better (and then the customer gets offered the same plan again, because it's all they qualify for, or get nothing at all because they're a month further behind and a workout is no longer feasable).

Well, here's the other side of this, if you're interested: Loan modifications are HARD, and sometimes it takes a bulldog lawyer to force the mortgage company to play ball. (Because let's face it, without a lawyer, what threat are you to them? They'll routinely do the minimum they have to, which often won't save your house, and then tell you tough shit.)

I am a housing counselor (though I do not negotiate with mortgage companies anymore, thank god) and I work with many others in several companies, HUD-approved and not. (The HUD approval process is kind of B.S., as you'd probably expect.) Unfortunately, counselors are not all that effective -- they're great if you're confused, or not very good at managing paperwork and doing ninja-customer-service things; but they can't make anything happen that a customer can't (and they can do LESS than a determined customer can). Again, they don't scare the mortgage companies at all, and they're no less subject to the paperwork runaround, phone-tree BS, stalling and delaying tactics, and outright bullshit the banks deliver, than you are. They're also doing that work on a VERY tight budget, so they're encouraged to go fast and not spend much time fighting once the bank says "no". But, in my work providing free ongoing advice to people who are doing their own loan-mods, I've learned that almost EVERY successful loan-mod involves the banks saying "no" at *least* once, and the homeowner persisting through that. A HUD counselor will usually give up once the bank says "no", or if the bank makes things too difficult and drawn-out. For many people for whom a counselor fails, a lawyer is the only option left.

And they're not always a bad option. A LEGITIMATE lawyer has made the difference for many of the people whose homes I helped save. That lawyer can threaten the mortgage company (believably) if they stall too long, lie to you, or refuse to honor a deal they made. They can also file for extensions to the foreclosure and delays so that the bank's reeking inefficiency doesn't bury your loan-modification. Plus, things go SO much faster when there's a lawyer on your side, and for many people, time is of the essence.

So, while obviously scam artists using lawyers who don't really do anything other than lend their name to the business are certainly an awful thing, legitimate lawyers can be a HUGE help in getting a loan mod, especially if you've tried it yourself and with a counselor's help and gotten nowhere (which is sadly many more people than you think). A legitimate lawyer:

- Lives in or near your community, and has been working there as an attorney for some time
- Has experience in real estate law or consumer law that's longer than the time he or she has been doing loan mods -- making them an experienced negotiator, which can be incredibly helpful when going up against the fortress of ineptitude that is modern banks
- Actually meets with you (the LAWYER meets with you) and explains the process, including what they can and can't guarantee
- Tells you if they think your case is hopeless, and won't take your money if that's the case. If you're not sure, ask the lawyer to tell you if they've successfully negotiated a case like yours, and what the outcome was.
- May collect money up-front (lawyers do that for a reason; it's called a retainer), but is clear with you about what the final costs will be, and how much of the money you can get back if the loan-mod fails. (They're a lot of work, so you may not be able to get a full refund, but all of the legit attorneys I know offer at least a partial refund if they're not able to get the results you want. Make sure you're clear with them about what you want, too.) The "retainer agreement" should say what you're paying, for what, and have the guarantee written out on it. You should sign that agreement, and you should receive a copy when you make your payment. If you didn't, you're not working with a lawyer, no matter whose name is on the door.

So yeah, these scams are too bad, for numerous reasons. Among those reasons is that they (and a predictably underinformed mainstream media) are scaring people off of seeking out legitimate legal help, when it may actually be the only way to save their home. And yes, lawyers cost a couple grand, but for many people (especially if they haven't been able to make a mortgage payment for a few months, and might have that money in-hand), that's cheaper than losing their house and moving.

Okay, enough free advice on weekends. >,<

@BritWoodcock: I think you're thinking of rich people.

@kevinhall: Hi, Kevin! Fist-bump from Metro Detroit and the foreclosure Ground Zero. I'm pretty sure you're not consulting with *my* company (wow it'd be awkward if you were), but thanks for helping this underfunded, rather desperate little industry out. Your advice is pretty dead-on too; thanks for that.

@bobloblawsblog: yep, I just heard a story last night about a guy who lost his house because his "counselor" advised him to stop paying his mortgage and not tell his bank about it or answer any of their correspondence. Bank, oddly, found this irksome after several months and foreclosed on him.

Something that was covered in my local paper recently:

Be careful when doing a Short Sale. You can get left still owing the bank money after the sale. When a house is foreclosed, in most states the bank cannot go after the any loses when the house sells for less than the debt. If you do a Short Sale, the bank can simply release the lien and not agree to forgive the remaining debt.

Make sure a competent lawyer reviews the paperwork before you sign - it might not be "standard boilerplate."

@Snarkysnake: Really, this is taking advantage of lawyers as much as homeowners.

There are far more law school graduates right now than there are law jobs - and the surplus is only going to increase, given the common misconception that a JD always means big bucks and the fact that the recession is sending a lot of people back to school.

After blowing three years and thousands of dollars on law school and being rewarded with zero job offers, I could see a newly-minted lawyer signing up for whatever shady outfit comes knocking in order to pay the bills.