Jan 30, 2009 12:26 am US/Pacific
Loan Modification Firms May Not Always Be Helpful
SAN FRANCISCO (CBS 5) ―
There are thousands of homeowners facing foreclosure in California who are desperately trying to hold on to their homes. Many loan modification companies are now advertising that they can help those homeowners.
But CBS 5 Investigates finds some consumers who signed up with those companies, paying thousands of dollars, say they received minimal help if any and say their money was wasted.
The ads are everywhere on the Internet and on the radio, such as the one from Saving California that tells listeners the company is "Saving California, one home at a time."
Marta Mendez heard an ad like that one in Spanish. "I thought it was a non-profit that will help you," she said.
She needed help because she and her husband faced foreclosure on their Watsonville bungalow. "For me the house represents the whole thing, the family, my husband, everything," said Mendez.
Mendez said she met with a representative from Saving California. "He told us the way they work is they work with the bank to lower our payments," she said. She said the company acted as middlemen for a fee, to negotiate a loan modification. "He said that as soon as I bring the money they can start working with the bank."
The Mendez's signed up, paying $3,500 to Saving California's parent company, Whitfield Financial, run by Ray Jeter. But after two months with no word, she called her bank to see if they'd received the modification request.
"They said no, nothing, nothing is here. We don't have no paperwork here for you," she said.
She said she wound up negotiating the loan modification herself.
Her opinion now of Saving California? "They ask you for some money and they don't do anything for her," Mendez said.
Then there's Keith and Millie Dixon. They signed up with a San Diego company called People's First Financial after getting a phone pitch.
"He just kind of said, you know, I am with this company and we do loan modifications and I was just desperate to go with something and so I just said wow, okay," said Millie Dixon.
In hopes of saving their home, they paid $3,000. Keith Dixon said, "I went online, checked the BBB (Better Business Bureau). It just sounded like a dream come true and, I believed it."
When the company told them in an email that their loan modification had been "approved", Millie Dixon said, "then I am like, oh my God, we finally got some hope here. We're going to save the house, we're going to. After that...I never heard from (the company's representative) again."
The day before Thanksgiving, they say the phone rang and a representative from People's First Financial informed them they would lose their home.
Millie Dixon said, "I was devastated. That was really bad! I was really upset."
They were forced to move out this month. "I really trusted that these people were going to get this done," said Keith Dixon.
The State of California has now taken action against both companies. The Department of Real Estate accuses Saving California and People's First Financial of taking money upfront without the agreements necessary to protect consumers, and in desist and refrain orders, has ordered them to stop those practices. But the state says those two cases represent just the tip of the iceberg.
"It's getting worse and worse every day," said California Department of Real Estate Commissioner Jeff Davi.
"There's been a huge ramp up of these loan modification companies promising people a solution, and a bailout and some kind of salvation here. And really many of them aren't even licensed, they don't have an advance fee agreement and they are really not doing anything. All they are doing is taking the money and moving on to the next person in trouble", Davi said.
CBS 5 Investigates wanted to know what those companies had to say. People's First Financial claims it has helped lots of people and said it's still trying to help the Dixons, but won't be refunding their $3,000.
And Saving California? CBS 5 Investigates caught up with owner Ray Jeter at his office. Regarding the state's allegations against him, he said, "I've been profiled. As a black man I have been profiled. Are you profiling me further?"
He said to "take it to (California Attorney General) Jerry Brown", but did not further explain his comment. But when asked again for any response he might have to the Department of Real Estate's allegations, Jeter said he was "set up."
Jeter told CBS 5, "Because the state has to target people from time to time and figure out where they need to be breaking the law. I didn't break the law on any of those cases there."
CBS 5 Investigates asked him about customers such as Marta Mendez who say his company took money upfront and Jeter denies taking any money upfront.
Jeter further said, "Stop saying that I took their money because I didn't take any money. All funds are in escrow."
Jeter said if customers request a cancellation, "they can all get their money back" because the money is in escrow.
However, California Real Estate Commissioner Davi said the state's investigation of Saving California showed otherwise.
"We found that they did not put the money in a trust fund, they did not have an advance fee agreement, they allowed access to the trust fund from non-bonded or non-licensed individuals, which meant the money wasn't protected and they were not complying with the law", Davi said.
Specifically in regard to the accounts he says he put the money in, Jeter now says: "If that is wrong, I apologize. I apologize to all of those who think I did something wrong.
The Department of Real Estate is currently working on more than 253 investigations involving loan modification companies.
To check if a company is licensed go to http://www2.dre.ca.gov/PublicASP/pplinfo.asp. If there is a "comment" at the bottom of the filing, consumers need to call and find out what it's about. It usually indicates a government action against the company.
To check if a loan modification company has an approved "Advanced Fee Agreement," go to
http://www.dre.ca.gov/mlb_adv_fees_list.html.
The non-profit alliance HOPE is a good resource for people who are trying to modify their loans, at
http://www.995hope.org/.
(© MMIX, CBS Broadcasting Inc. All Rights Reserved.)
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