New Breed......Same Scam

Our company was recently contacted by a “law office” that was systematically contacting companies in the loan modification industry. After talking with the gentleman for about 5 minutes, I realized that he had very skewed ideas of how loan modifications were done and who was legal and able to do them. Just like the other firms before them, he went on to explain how licensed attorney's are the only ones that are able to successfully and legally do loan modifications. I mentioned SB94 and how it specified licensed mortgage brokers as the ones that were not only legal, but actually have a professional background in what's required to get a professional loan modification(preparation of financial statements and documents, knowing what the lenders requirements are, submission to the lender, and ultimately getting a lender to say yes!). He agreed, and conceded that they will often outsource their modifications to brokers for their assistance for that reason. This was the first of three major holes in his presentation. Aside from contradicting himself on who was legal to do them, he clearly admitted that the “Attorney” he represents doesn't do ALL of the modifications himself as his presentation indicated. After 10 minutes, I realized that I was dealing with a new breed of con artist, but essentially the same scam.
Misrepresentation is one of the largest problems plaguing the loan modification industry. Aside from outrageous fees, and companies that have no intention or proven process for completion, companies that “bait” their customers by telling that an Attorney is going to be personally working the file from start to finish is a flat lie. In his written presentation to me, it says clearly that they are offering to pay “Independent Contractors” $1000 for their “non-legal work performed”. That work performed was described as the following: 1)Document Preparation, 2)Assisting the Homeowner with the Hardship Letter, 3)Assisting the homeowner with the completing the loan workout application, 4)Confirm that all income stated matches the income documents 5)Turning in a fully completed file with all documents, forms and items listed on the check list immediately. In the end, the offer was for the Independent Contractor to “sell” the customer on the idea that they were going to have everything done by the Attorney thus it warranted an upfront charge of $2495 that went into an trust account. Yet the instructions for remittance on the agreement was a cashiers check payable to the Attorney. This is of course prior to any additional charges that he would charge the customers if they were already in foreclosure, had a sale date, or were looking to short sale if the modification was unsuccessful. If your head isn't spinning yet, wait, it get's better.....
The “loop hole”, is that Attorney's are not subject to CA DRE laws and their regulations. The trust account is in lieu of an escrow account which has been deemed illegal. So in the presentation where it says that they can legally charge the customer upfront due to the trust account, I believe they are correct and that they have in fact found another hole in SB94. He seemed pretty proud about it, and when I explained that if called to the carpet that anyone who knew better would call them on it. He then went on to say that, “The State Bar can pound sand, because we're not doing anything wrong or unethical”, my stomach started to sour. I realized that this guy felt his law office was above the law, and for the most part he's kind of right. What they didn't explain in the presentation that although they may not be subject to DRE laws, the licensed mortgage brokers that they're looking to solicit are. Although we don't necessarily agree with the absolutely no upfront fee clause in SB94, our mortgage brokers nonetheless comply with it until specified otherwise. Furthermore, mortgage brokers that were doing loan modifications previous to SB94 were typically doing progression payments with their customers, where the customers DIDN'T have to pay everything upfront, but rather a very reasonable application, submission, and negotiation fee. However, as my platoon sergeant used to say, “I say jump, you say how high?”. This is the difference in compliance between legitimate mortgage brokers that are doing loan modifications and following the rules, vs. the Attorney's that feel they are above the law, and are still trying to make their big money while they can.
PMC is not only dedicated to our customers whom we service, but also to the longevity of the industry and it's regulation. This problem didn't happen overnight, and it's certainly not going to go away overnight. If companies were half as concerned about genuinely providing a valid service for fair compensation as opposed to doing the “rip and run” business model, then the industry wouldn't be under such speculation. Furthermore, the legitimate companies that do have their customers best interests in mind would not only have more flexibility to operate without such a high accounts receivable (as most legitimate companies do), and actually be able to work with State and federal agencies to get a long term solution, and get this economy moving in the right direction. Everyone agrees that it has to start with the mortgages, we also agree that the efforts thus far have been futile yet very costly, at what point will we agree that a reasonably regulated private industry business model is the way to go? PMC has not only answered the questions plaguing the industry for customers, and business professionals looking to help, but also for the state entities that are looking to regulate. PMC without question proved the safest, most cost effective, and fairest program to all parties involved.