Loan Modification Does and Don’ts

Be Weary of The Scammers

There are new scams to the real-estate market crash – be weary of any and all advertisements that promise recovery for an upfront fee. In the past six months I have seen solicitations from attorneys and non-attorneys to fix problems and get people’s homes back. It is imperative to know that the California Department of Real Estate issued a consumer alert last month warning mortgage holders to beware of such solicitations by lawsuit marketers who request upfront fees to file mass joinder or class action lawsuits with promises of extraordinary home mortgage relief.

The marketing materials variously claim a class action lawsuit may already have been filed and a homeowner can join as a plaintiff and can stop paying the lender, the lawsuit will help modify a home loan, or filing a lawsuit will stop the homeowners’ payment obligation and foreclosure. Some advertisements claim damages could be awarded that would reduce the principal balance of the note on your home to 80 percent of market value and give you a 2 percent interest rate for the life of the loan. Such claims are exaggerated across the board. But individuals in this real estate market crisis are desperate for some kind of hope, and this gives them the hope for a few thousand dollars upfront. Don’t be a fool, as these solicitations are the latest in a long list of ways to deal with the housing foreclosure crisis.

In October 2009, Senate Bill 94 became law in California, prohibiting lawyers from collecting upfront fees in loan modification or mortgage forbearance matters. In January, the Federal Trade Commission also banned advance fees but carved out an exception for lawyers who meet certain conditions. The newest claims, usually made via direct mailers and the Internet, offer both legitimate-sounding litigation services and promises of extraordinary remedies, all with the final results of getting some of your money. But this is not guaranteed. Just this past week, a lawsuit was brought alleging that The American International Group and four large banks engaged in a widespread and systematic fraud of U.S. taxpayers in connection with the federal bailout of the insurance giant during the financial crisis of 2008, according to a lawsuit unsealed April 28. The lawsuit, filed last September in federal district court in San Diego by two veteran political activists, was first reported Wednesday by the New York Times. The suit, which the Times describes as the first known whistle-blower case to come out of the financial crisis, alleges that AIG and the banks engaged in a variety of fraudulent and speculative transactions that ran up their losses into the billions of dollars. Then they persuaded the Federal Reserve Bank of New York to bail them out by giving AIG two rescue loans totaling $85 billion.

The loans were improper, the suit alleges, because the Fed made them without getting a pledge of high-quality collateral from AIG, as required by law.

It seems based on the current litigation of active attorneys, there may be clear merit to the Sue Your Mortgage Lender propaganda but this is not fool proof and not guaranteed for every homeowner. Nevertheless, we urge consumers to be skeptical about marketing pitches and to carefully hire lawyers and examine claims that lawsuits can protect homeowners from foreclosure. Litigation can be expensive and protracted and there are no guarantees with respect to the outcome.

This column is produced by Mary Der-Parseghian, Esq. of Der-parseghian Law Group. For questions or comments, please send your message to 4727 Wilshire Blvd., Ste. 301, Los Angeles, CA 90010; email us at Mary@MaryDLaw.com; www.MaryDLaw.com or call 323-937-2727.

© 2011. Der-Parseghian Law Group

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