Eric's Blog

President Obama has made mortgage modification a pillar of his housing plan and very recently, he assured us that now was the time to refinance our homes. As a result, more and more people are seeking these mortgage workouts, which will go a long way toward reducing the number of foreclosures and thus keep people in their homes, which is crucial to stemming the devastating effects of the housing crisis.

Unfortunately, as innocent people seek legitimate ways to renegotiate the terms of their mortgages, there are scam artists waiting to take advantage of them.

Scams targeting struggling homeowners seeking to stave off foreclosure have skyrocketed, federal officials said Monday, disclosing that they are investigating more than 2,100 companies and have filed legal actions against an Irvine firm and three others.

“The unscrupulous actions of individuals and companies to exploit the misfortune of others is despicable, it’s immoral, and it’s also illegal,” said Atty. Gen. Eric Holder, who announced the campaign with Treasury Secretary Timothy F. Geithner and other federal officials.

The way this scam works is simple: people posing as modification counselors will show up, ask for a fee, promise to change the mortgage, and then do nothing. The amounts are not huge, usually ranging from $500-$5,000, but it’s enough to devastate homeowners already in dire financial straights.

The fact is, modifying mortgages costs absolutely nothing. The reason these scam artists have been able to thrive is that there is no agency currently tasked with regulating the modification agencies prior to the filing of a Notice of Default, which is the best time for a homeowner to seek remedy. Yesterday I introduced an ordinance that would do just that.

This ordinance requires that:

1) Mortgage consultants provide a contract. The contract must specifically state in bold-14 point font that the homeowner does not need to pay anyone for these services and can access free resources at makinghomeaffordable.gov or by calling 888.995.HOPE.
2) Prohibits the charging of an upfront fee
3) Provides for private damages (which incentives attorneys to go after and sue these scammers).

I’m proud to say that the ordinance has passed through the Housing, Community and Economic Development Committee and the entire City Council will be considering it over the coming weeks. Homeowners have been hit hard enough by the housing crisis without having to deal with scam artists who would do them even more harm. As the federal government figures out how best to regulate loan modification agencies, we at the local government level have a responsibility to do what we can to protect homeowners.

This entry was posted by Eric on on Thursday, April 16th, 2009 at 10:09 am and is filed under The 13th District. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.