WASHINGTON – April 8, 2011 – Four fair housing organizations released findings from a year-long undercover investigation of 80 loan modification companies, which they say revealed an industry rife with corrupt practices.

The National Fair Housing Alliance (NFHA), the Connecticut Fair Housing Center, Housing Opportunities Made Equal of Virginia Inc., and the Miami Valley Fair Housing Center issued a report entitled, “Have I Got a Deal for You! An Undercover Investigation of Mortgage Loan Modification Scams.”

An analysis of the 80 loan modification companies uncovered common tactics used by scammers to entice homeowners to use their services:

• 55 percent required an upfront fee to start work or required a low initial fee to conduct minimal work on behalf of distressed homeowners, such as reviewing loan documents.

• 43 percent guaranteed or promised they could secure a loan modification even before learning about the homeowners’ financial limitations.

• 24 percent advised or encouraged homeowners to stop making their mortgage payments or to stop contacting their lenders.

• 16 percent guaranteed a new, much lower interest rate ranging between two and 6 percent on modified loans.

• 12 percent discouraged homeowners from seeking free help from government-approved housing counseling agencies.

• 8 percent encouraged homeowners to provide fraudulent information to their lenders.

“This is shameful abuse by loan modification scammers to take advantage of desperate homeowners,” says Shanna L. Smith, NFHA president and CEO. “We and our partner organizations will work to see to it that these companies are prosecuted by the Federal Trade Commission and other federal and state enforcement agencies.”

With one in nine homeowners nationwide more than 90 days behind on their mortgage payments, a lucrative industry of mortgage modification and foreclosure prevention scams has emerged.

Investigators working on behalf of the fair housing organizations captured scammers saying things like:

• “I’d be breaking the law if I told you to stop paying your mortgage, but friend-to- friend, you won’t get a loan modification until you are behind on your mortgage.”

• “If you don’t qualify, we modify expenses for you. They [the lenders] don’t check it. No one knows what you spend on groceries. We make you qualify by playing with the numbers.”
 
To read the full report, go to www.nationalfairhousing.org.

© 2011 Florida Realtors®