Tuesday, June 9, 2009

“The entire industry is a scam, in my opinion,”

TO BE NOTED: From the NY Times:

Cuomo Subpoenas Loan Modification Companies

The New York attorney general, Andrew M. Cuomo, plans to sue a loan modification company and has subpoenaed information from 14 similar companies as part of a nationwide investigation.

“The entire industry is a scam, in my opinion,” Mr. Cuomo said Tuesday. “These are services that homeowners don’t need to pay for in the first place.”

He announced plans to sue American Modification Agency, or AmeriMod, one of the state’s largest loan modification companies.

He accused the company of charging upfront fees in violation of state law, and falsely promoting a 90 percent to 100 percent success rate in modifying mortgages. Mr. Cuomo said the fee is typically 1 percent of the outstanding mortgage.

AmeriMod, based in Uniondale, N.Y., and its president, Salvatore Pane Jr., did not immediately return a call seeking comment.

Mr. Cuomo said his subpoenas seek information about loan modifiers’ fees, services and communications, as well as their marketing practices, often through television advertisements.

He said the inquiry follows complaints from homeowners across New York that loan modification companies did not fulfill promises, and often left customers deeper in debt.

Keith T. Gumbinger, vice president for the mortgage information publisher HSH Associates in Pompton Plains, N.J., said the loan modification industry had sprouted since late 2006, as rising delinquencies overwhelmed servicers.

Last month, the Federal Deposit Insurance Corporation issued guidance about loan modifications, cautioning that “scam artists will demand a large upfront fee, often thousands of dollars, and they do very little to actually help.”

The F.D.I.C. noted the availability of federal programs that provide free help, including housing counselors approved by the Department of Housing and Urban Development.

Mr. Cuomo said the economic and housing downturns had allowed “unscrupulous people” to take advantage of frightened borrowers. “The foreclosure rescue industry is an ugly example of that,” he said.

Mr. Gumbinger said the rise of loan modification companies might prove short-lived once the housing market turns around."

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