National volunteer programs and state government entities are busy working to unearth and close down "unscrupulous and unlicensed loan modification companies" who prey on financially stressed homeowners.
For example, NeighborWorks organizations around the country held more than 150 events during National NeighborWorks Week June 5-12 to inform tens of thousands of homeowners on how to avoid and report mortgage modification scams.
The events included hundreds of volunteers canvassing neighborhoods with tip sheets and flyers, and dozens of one-on-one and group workshops about reputable mortgage modification programs.
"Many mortgage modification scams are sophisticated, slick and so well crafted that homeowners find it difficult to recognize them for the danger that they are," said NeighborWorks America CEO Ken Wade.
"More than 7,700 mortgage modification scams have been reported to the authorities since our campaign started, and we believe that the number of homeowners who have been victimized is significantly greater."
In Sacramento, the California Department of Real Estate is busy working to unearth and close down "unscrupulous and unlicensed loan modification companies" who prey on financially stressed homeowners.
According to the DRE, these companies seek out homeowners who are facing foreclosure and promise to obtain a loan modification, but once the homeowner pays a fee, little or nothing is done to get the homeowner's loan modified.
"These scammers are good at what they do. They promise to save your home and offer financial relief. Instead, they take your money and provide little or no services," said DRE commissioner Jeff Davi.
In 2009, the DRE filed actions against nearly 600 persons and entities that were providing loan modification services illegally. Another 150 such actions were filed in the first four months of 2010.
Borrowers who seek a loan modification or alternatives to foreclosure should take precautions to prevent falling for a scam. This includes never paying an upfront fee. A recent change to legislation makes it illegal to collect advance fees for loan modification services. The advance fee prohibition extends to attorneys, real estate licensees and foreclosure consultants.
It is important for borrowers to look for free alternatives, Davi points out. The Department of Housing and Urban Development offers foreclosure avoidance counseling through nonprofit agencies.
"Check credentials," he points out. "Do not engage the services of an unlicensed loan modification firm. Check out a broker's credentials at the DRE's website at www.dre.ca.gov. Check out lawyers at www.calbar.ca.gov. Also check with the local Better Business Bureau."
The DRE has issued a consumer alert on forensic loan audits. Davi says there are no certifications for certified forensic auditors or other official, important or lofty sounding titles."
In a recent federal court case, Glenn Steven Rosofsky pleaded guilty to information charging him with one count of conspiracy to commit wire fraud and money laundering, one count of money laundering and one count of filing a false tax return.
Criminal charges stemmed from Rosofsky's alleged operation of a fraudulent telemarketing operation in San Marcos, Calif., according to Karen Hewitt, U.S. attorney for the Southern District of California.
In his guilty plea the court said Rosofsky admitted that in April 2009 he and Michael Trap (who previously pleaded guilty) began operating a loan modification business using the names Nations Housing Modification Center and Federal Housing Modification Department in an effort to fraudulently sell loan modification services to homeowners who were delinquent on their monthly mortgage payments.
Hewitt said Rosofsky admitted that he, Trap and others used false and fraudulent statements and representations to induce customers to purchase loan modification services from NHMC.
Among the misrepresentations made to customers were claims that NHMC had "attorneys" and "forensic accountants" on staff to deal with the loss mitigation departments of banks on behalf of NHMC's customers, that NHMC had achieved an "extremely high success rate for homeowners that met Home Affordable Modification Program guidelines" and that NHMC was located on Capitol Hill.
In fact, as Rosofsky admitted, NHMC did not have attorneys or forensic accountants on staff, it did not have a high success rate of modifying loans, it had no connection with the Treasury Department's Making Home Affordable Program, and its only presence in Washington was a rented post office box.
According to Hewitt, these false claims were made in solicitation letters that were mailed throughout the country to individuals behind on their mortgage payments and encouraged struggling homeowners to call a toll-free number to purchase NHMC's loan modification services.
