Maryland Targets Mortgage Scams

Recently there was an interesting internal news letter posted on the state of Maryland's Department of Labor, Licensing and Regulation's website. This newsletter exposed a couple of the current, housing crisis, scams occurring in the state. Each of these are nothing more then “copy cat” crimes that have recently been committed nationwide. These scams are not simply an accidental fault in process, or even an outright illegal operation. These “legitimate” businesses were, in some cases, literally stealing people's homes and equity. These operations made profits, in the millions of dollars, in a very short period of time. There are two major factors attributed to why this happened.

The first reason, of course, is lack of state mandated direction or options for troubled homeowners. The Maryland Commissioner of Financial Regulation, Sarah Bloom Rankin, was quoted saying, “Quite simply...do not pay, walk away. Call your servicer directly or see a non-profit counselor.” when she referred to any company that offers housing assistance for a fee. The majority of the applicants that are now coming to us asking for assistance have already been this route and tried contacting their servicer directly. Additionally many have also conferred with a non-profit counselor only to find that they are right back at square one. Furthermore, CNN Money recently posted an article showing that only 4% of the modifications that are applied for are actually approved. If our professional negotiators had no better than a 4% success rate, our company would have been shut down a long time ago. Furthermore we would have been vilified as incompetent opportunists taking advantage of distressed homeowners. Yet the people that have been elected into positions, to protect our best interests and help us make challenging decisions, are to this minute still advising their constituents to only consider a process that registers a confirmed 4% success rate. If the state would simply admit that their efforts in trying to handle this crisis have, thus far, been unsuccessful, then perhaps they would be open to alternative ideas for addressing the issue. Like other states, passing fair legislation that allows legitimate, licensed, mortgage brokers to perform loan modifications, would be an excellent first step. This would provide homeowners an alternative to the game of “Russian Roulette” troubled homeowners are now playing with con artists and scam companies. This would also provide structure and guidelines for the companies that are truly in the business with their customers best interests at heart.

The second reason is also related to the first. Legislation. HB 361 was written to give oversight to foreclosure consultants. Again, two major problems have occurred. When this bill was first drafted it specified licensed attorneys, licensed mortgage brokers, and licensed real estate brokers as those qualified to act as foreclosure consultants. Well...most “Attorneys” have very little to no experience in loan modifications. They either A) woke up one morning and decided to be a “loan modification attorney” or B) they are allowing some other “company” to use their name and license to circumvent the rules of the state. This has been proven in CA by the CA DRE, and the CA State Bar. Real Estate Brokers specialize in “short sales” right now. They typically sell real estate and do not contact lenders for approvals. Furthermore it would be impossible to have a fiduciary relationship for a loan modification due to the option of short sale if the modification is unsuccessful. Of the three, licensed mortgage brokers are the only ones with a professional history and background necessary to competently perform a loan modification. However, they are also the only ones that were literally “crossed out” in HB361, thus leaving attorneys and real estate brokers as the anointed ones. Virtually every other state either is currently writing legislation or already has written legislation endorsing licensed mortgage brokers as the “chosen few”. The second problem the Commissioner does not seem aware of is in the language of the legislation. Currently it reads that if an individual is “in foreclosure”, then anything further action related to helping the homeowner is considered a “foreclosure rescue transaction” and it is deemed that NO ONE can assist. Presumably, what was intended, is that once a customer is in foreclosure, that anyone that is engaged for help must adhere to certain rules and/or be professionally licensed. Unfortunately, rules are usually enforced on the “letter of the law”, not the individual interpretation. (of course there are always rare cases).

The bottom line is that if the state hasn't put out clear guidelines, how do homeowners know where to turn? Furthermore, licensed mortgage brokers that are willing and able to perform loan modifications, in the state , are obviously reluctant at this point. They clearly will not want to do anything that would jeopardize their professional accreditation.

I recently called the state hotline and talked to the licensing division. It was explained that mortgage brokers are, in fact, the ones that should be doing loan modifications. Unfortunately no one could direct me to where this could be seen in writing. In the past, we've posted blogs like this and the state's legislation was soon changed to reflect much of the information that we blogged about. For the sake of Maryland's residents, we hope that this is the case here as well.