Most mortgage industry insiders believe there is still a 12 to 18 month window of opportunity left for foreclosure prevention services like loan modification and loan workouts. Loan modification leads are still hot in the mortgage marketing circles. Foreclosure scams continue to run rampant and that makes consumers very weary.
New measures are being implemented to take aim at what consumer groups say is a surge in fraud by entities offering to help struggling homeowners modify their home mortgage loans or avoid foreclosure. “There are a lot of different scams going on right now,” said Martha Lucey, president of ByDesign Financial Solutions, a nonprofit credit-counseling agency. “Homeowners are struggling with affordability and many are desperate. When consumers are desperate, they’re willing to pay for unrealistic financial solutions.”
The most common allegations involve struggling homeowners who make up-front payments, often in the thousands of dollars, to firms that promise to work with their mortgage lender to renegotiate their mortgage and lower their monthly home loan payments. The mortgage loans are never changed and the money is gone.
A bill by state Sen. Ron Calderon, D-Montebello, would prohibit firms from charging advance fees for mortgage loan modification services. Supporters say the bill would prevent people in bad financial straits from becoming even worse off.
In addition, the legislation would require for-profit firms to tell potential customers that they could get free assistance from various nonprofit counseling agencies. “The federal fix is going to take care of a lot of the problems we’re experiencing on the foreclosure side of things,” Calderon said. But people looking for help need to be protected, he said.
The California Association of Realtors opposes the bill. The organization objects to the measure’s blanket prohibition on advance fees. Assemblyman Kevin Jeffries, R-Lake Elsinore, said he is open to more foreclosure-related safeguards, up to a point.” My view is that the federal government is getting pretty pro-active in cleaning up the lending industry,” he said. “There’s no reason to duplicate what’s happening at the federal level.”
Several other bills build on parts of SB 1137 dealing with rental tenants in foreclosed properties. One measure would make the buyer of a rental property at a foreclosure sale responsible for returning the tenants’ security deposit.
According to Jim Miller, another bill would give renters up to a year to leave properties that revert to the lender after foreclosure. The renters would have to move if new owners want to move in. “We think having a family there is much better for all parties involved,” said Ronald Coleman, legislative director of the low-income advocacy group Association of Community Organizations for Reform Now, known as ACORN. Vacant homes get run down and attract vandals, he said.
