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Watch Out Santa Rosa: Deceptive Mortgage Practices Are Back!


Do you remember when a federal jury decided that Bank of America was guilty of selling subprime mortga

ges and ordered the bank to pay $863 million in damages? In that case, the US Justice Department argued that Countrywide, which Bank of America purchased in 2008, committed fraud by selling shoddy home loans over a two-year period to Fannie Mae and Freddie Mac.

Bank of America wasn't the only culprit. The US subprime mortgage crisis was the main culprit of the recession back in 2008. However, there were other factors contributing to the recession including the steady decline in home prices after peaking in mid-2006 and the percentage of households that became increasingly indebted. Inventive loan packages, such as easy initial terms and interest-only loans, were also to blame for the economic crash.

Industry experts agree that the banking and mortgage industries were mainly to blame. As a result, big banks became unpopular, and many private mortgage companies went out of business.

Loan Modification Scams Are Back

You would have thought that those mostly responsible for the recession would have learned from their mistakes. Apparently they haven't. Mortgage scams are on the rise and people looking to modify their loans need to be on the lookout for these unscrupulous brokers.

Barbara Floyd Jones is a senior manager of national homeownership programs at NeighborWorks. Recently, she decided to ask people on the street what they knew about loan modifications. Here's what they didn't know: It's illegal for a company to collect upfront fees for mortgage relief services.

According to the Mortgage Assistance Relief Services rule, companies offering loan modification services may not collect any fees until a lender accepts the consumer's request for modification and homeowners must receive a written document from the lender that describes key changes to their mortgage.

According to Jones, those who offer fraudulent modifications look for borrowers in these situations:

  • A homeowner owes more on his or her home than the house is worth.
  • A homeowner worried about whether or not he or she can make future payments.
  • A homeowner who is behind on his or her mortgage payments and fears foreclosure.

It's estimated that consumers have paid more than $93 million to loan modification scammers.

There is some good news. The Obama administration has decided to extend its Making Home Affordable program through 2006. This program is intended to help homeowners avoid foreclosure by modifying their payments.

How You Can Avoid Mortgage Fraud

You can avoid falling victim to unscrupulous mortgage brokers by following these suggestions:

  • Never pay a fee in advance to modify or refinance your home.
  • If you fear foreclosure, make certain you receive a written guarantee that the company can stop foreclosure as you modify your loan.
  • Do not stop making your mortgage payments.
  • Ignore mortgage industry advertisements.

To find an HUD-approved housing counseling agency, call 888-995-4673.

If you need immediate debt relief, contact our lawyer by calling us at 707-623-1875 to schedule a free consultation. You can also fill out our online submission form. We offer flexible scheduling arrangements and accept all major credit cards.

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Santa Rosa, CA 95401

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Ukiah, CA 95482

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