NCLC Issues Report on Loan Modification Scams

by Brian Wolfman

On Friday, the National Consumer Law Center issued this report on loan modification scams. The beginning of the report's executive summary describes the problem:

As the number of foreclosures continues to grow, a new “industry” has emerged seeking to profit from desperate homeowners who are trying to save their homes. For-profit loan modification services claim to help homeowners obtain changes in the terms of their mortgage loans that will make the loan more affordable and, thereby, help the homeowner save their home from foreclosure. Unlike older foreclosure rescue scams that seek to bilk homeowners of their equity, loan modification scams are more interested in homeowners’ spare cash. They make extravagant and unverifiable claims regarding their ability to help but too often the homeowner gets nothing after paying thousands in fees they can ill afford to spare.

The report proposes a number of legislative and regulatory solutions including a proposal that the Federal Trade Commission prohibit the industry from charging any up-front fees and instead requiring that the fees be tied to benefits actually provided to the homeowners -- that is, "prohibiting fees until the homeowner obtains an affordable, sustainable loan modification."

Check out NCLC's press release as well.

Comments

[Erin Baldwin]

With all due respect, if the above executive summary summarizes the problem as the National Consumer Law Center sees it, the NCLC has failed utterly in its analyses.

Most importantly, it has neglected to tell the story of the thousands of attorneys that have circumvented the law by forming loan modification "law firms" so that they could legally charge upfront fees. The problem is -- there are no lawyers offering legal services at these "law firms" whatsoever; but there are plenty of 20-something college kids with no legal experience and they are being paid via attorneys fees collected, a violation of the law.

Attorneys across the country have maliciously used the public perception of attorneys' "skill and expertise" to lure desperate homeowners into their scam convincing them that "only an attorney can negotiate with a bank." They snatch up the money the homeowner could have paid their mortgage with depositing it in a personal attorney checking accounting (NOT in a client trust account), and then walk over and casually drop the file on the desk of a kid whose last job was serving joe at Starbucks.

More than 80% of today's scams are being perpetrated by attorneys. We have reported on this fact since January 2009 and finally Governor Arnold Schwarzenegger has stewarded Senate Bill 94 that mandates that attorneys be included in the prohibition of collecting advanced fees.

How can a summary about the ills of loan modification scams be absent this part of the story? You can read more about this story and the writ of mandate we are writing against the California State Bar on behalf of homeowners in foreclosure or those that have lost their homes at the hand of California State Bar members.

The State Bar had failed to enforce the Professional Rules of Conduct it wrote to protect consumers from the misconduct of its members including sharing fees with non-attorneys as well as used car salesmen solicitation and advertising. It has also neglected to open its Client Security Fund to these folks when the Fund's primary purpose is to reimburse clients that have been the victim of member misconduct.

Did you know that there is a lawyer by the name of James Parsa that runs Parsa Law Group (one of the most egregious offenders) that pled guilty to two separate counts of statutory rape? He is a "member in good standing" at the California State Bar. Also among the members in good standing are Richard Stinstrom of United Law Group who stole half a million dollars from his own parent's estate. His own sister turned him in to the California State Bar almost two years ago and he is still practicing law without penalty. We could give you hundreds of such stories.

We must say here that one must not forget that the National Consumer LAW Center is made up of attorneys and is as such, a part of "the fraternity," that would never snitch on its own. Rather, it seeks to point the finger at the FTC and other regulatory agencies unrelated to the true problem.

The NCLC thinks "new legislative and regulatory solutions" will help. Why don't we just force the State Bars to do their job and start disbarring the obvious misfit criminals out there practicing law as "respected officers of the court"??

It's sickening for us to receive over 500 consumer emails every day of the week from folks who have been harmed by lawyers allegedly providing loan modification services and then to happen upon this story on Public Citizen's website. We have a big picture of Ralph Nader on our wall and somehow we don't think he would be pleased with the obvious slanted rhetoric being published on this site.

The National Consumer Law Center is now part of the problem; congratulations. We humbly request that you remove the word "Consumer" from your organization's name; it's a fraud of mammoth proportions.

Erin Baldwin
Bad Biz Finder
badbizfinder@aol.com
http://badbizfinder.wordpress.com

[Christian Loan Modification]

Thank you for your truly insightful and helpful information. As someone who does loan modifications, and works for a truly reputable and ethical company, I am pleased to see that the "lawyers" taking advantage of homeowner's are finally being held accountable in some regard. I received a phone call yesterday from a woman in Texas who hired a loan modification lawyer to help her. She was not delinquent when she hired the lawyer, who advised her not to make her payments and not to speak with her lender. This occurred in January of 2009, and as of July 13, 2009 her house was sold at auction. The lawyer advised her that although she was approved for a loan modification, they didn't have time to stop the sale from happening. This is the biggest bunch of malarcy I have ever heard. The woman was kept in the dark, and advised everything was okay until the sheriff showed up to evict her and her 2 kids. They moved her possessions to the street! Who will hold this lawyer accountable? This woman's lost her home, and thought all along that she was being given legal advice from her lawyer.

My experiences bring me in contact day after day with homeowner's who have similar experiences with lawyers taking advantage of them. Bottom line is, no up front fees mean no up front fees. Lawyers must abide by the State Bar rules.

As the loan modification industry is relatively new and on the rise due to the housing crisis and the state of the economy the bad make the media headlines, and the good go on doing what they do best. As time goes by the bad will be weeded out, and the good will stand strong and true based on reputation and track record. The unfortunate aspect is how many homeowner's are facing a more difficult situation now than they were before hiring the "lawyer". Consumer beware, this is your home, don't pay for services not already rendered and you should know that you should continue to make your mortgage payments if at all possible, and you should always be in communication with not only who you hire to assist you with your loan modification, but also with your lender. It's your home, follow up that the company you hired is doing their job and working with your lender. Don't take a representative's word for it, make sure of it!

I can't give specifics with regard to the lawyers or the law firms you refer to, but I agree on a whole with the direction of your article and applaud you for your efforts.

[Loan Modification CA]

I read your blog and I feel that the information given here about "NCLC Issues on Loan Modification Scams" it's useful to us.

[Shortcuts to Millions]

These kinds of scams are common , you need to differentiate among truth and false with key concept implementing strategic values.

[Brian Wolfman]

Hello. After many years at Public Citizen, I have moved to Georgetown
law school, where I will be a co-director of the Institute for Public
Representation (IPR) and head IPR's Civil Rights Clinic. You can reach
me at 202 661 6582 and wolfmanb@law.georgetown.edu.

If you want to contact the Litigation Group, contact Litigation Group
Director Allison Zieve at azieve@citizen.org.

Brian Wolfman

[Loan Modification]

Thanks for the update Brian!
All the best to you at the Institute for Public Representation at Georgetown. Congratulations! I always enjoyed reading your work.

[Melba Solis]

nice post..thanks for this info..

[Nancy Carlson]

Do You Qualify?

1. Do you live in the home?
2. Is your current loan amount within the Fannie Mae conforming limits ($625,500 in high cost areas
and for other areas it is $417,000)
3. Are your current house payments more than 31% of your gross income?(Loan modification kits can
help with all financial calculation your lender may want to see)
4. Are you must be able to prove you have current income?
5. Do you currently have a job?

http://www.obama-loanmodification.com/

[Brian Wolfman]

Hello. After many years at Public Citizen, I have moved to Georgetown law school, where I will be a co-director of the Institute for Public Representation (IPR) and head IPRs Civil Rights Clinic. You can reach me at 202 661 6582 and wolfmanb@law.georgetown.edu.

If you want to contact the Litigation Group, contact Litigation Group Director Allison Zieve at azieve@citizen.org.

Brian Wolfman

reply-3P3ND8VUHUI4_4A78ZH6X37RE 12/02/09 01:09

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A new comment from Nancy Carlson was received on the post NCLC Issues Report on Loan Modification Scams of the blog CL&P Blog. If you would like to post a reply to this comment you can do so at the following URL:

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Comment:

[Chris parker]

Nice Article; Obama loan modification is the federal government’s answer to the rising need of preventing foreclosures for American homeowners. http://www.obama-loanmodification.com

[Brian Wolfman]

Hello. After many years at Public Citizen, I have moved to Georgetown law school, where I will be a co-director of the Institute for Public Representation (IPR) and head IPRs Civil Rights Clinic. You can reach me at 202 661 6582 and wolfmanb@law.georgetown.edu.

If you want to contact the Litigation Group, contact Litigation Group Director Allison Zieve at azieve@citizen.org.

Brian Wolfman

reply-3P3ND8VUHUI4_4A79E8IJO7RE 12/16/09 17:20

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A new comment from Chris parker was received on the post NCLC Issues Report on Loan Modification Scams of the blog CL&P Blog. If you would like to post a reply to this comment you can do so at the following URL:

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Comment:

[Nancy Carlson]

Obama’s Loan Modification Program
“Obama’s Loan Modification Program – How to Qualify for Help!”

http://www.obama-loanmodification.com/

[Brian Wolfman]

Hello. After many years at Public Citizen, I have moved to Georgetown law school, where I will be a co-director of the Institute for Public Representation (IPR) and head IPRs Civil Rights Clinic. You can reach me at 202 661 6582 and wolfmanb@law.georgetown.edu.

If you want to contact the Litigation Group, contact Litigation Group Director Allison Zieve at azieve@citizen.org.

Brian Wolfman

reply-3P3ND8VUHUI4_4A79GN2XQ7RE 12/21/09 05:31

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Comment: