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State Investigates Loan Modification Companies

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Nov 16, 2009 10:12 pm US/Mountain

State Investigates Loan Modification Companies

Written for the Web by CBS4 Libby Smith

Reporting
Karen Leigh
EDGEWATER, Colo (CBS4) ― Juan and Liz Mendiata have lived in their Edgewater home for nearly 5 years. They started their family there, having two little ones, and they have dear friends living nearby.

"Oh, we love our house," Liz told CBS4.

But now this dream come true is turning into a financial nightmare. The couple is faced with a mortgage payment that will balloon by $1,000 per month next year. Despite both working full time, they won't be able to make the higher payment.

"We started to panic, but then my mom had a friend of the family that knew this company, American Modification Group, that were helping people just like us," Liz explained.

American Modification Group is among dozens of new companies offering to help homeowners work with their mortgage lenders to negotiate new, more manageable home loans.

"They wanted money up front, but they also made it clear that they would never collect more than a certain amount." Liz said.

The Mendiatas paid $1,500 up front and signed a contract that spells out that money would be refunded within 30-days if a loan modification didn't go through.

"So it seemed pretty safe. And on the Better Business Bureau, they have them on their as having a B+," Liz said.

"So you felt like you did your homework, somewhat?" CBS4's Karen Leigh asked the couple.

"Yes," they both responded.

Things seemed to be going well until Liz got a letter from her mortgage company saying the loan remodification was denied. Several months later she stopped hearing from American Modification Group and couldn't contact anyone with the company.

"I just felt so desperate. I mean the people who were supposed to help us weren't helping us anymore," Liz said.

"We see, time and again, people coming to us saying I paid this money and I haven't gotten anything from it," said Zach Urban, spokesperson for the Colorado Division of Real Estate.

Division of Real Estate investigators are looking into how loan modification companies charge clients. Charging up front for services that haven't been rendered is against state law.

"We have dozens of investigations going on right now into loan modification companies for the very same issues that are presenting to this family," Urban told CBS4.

They also warn homeowners that many of the services offered by loan modification companies can be had for free through non-profit housing counselors.

"It's a matter of going for what's free first, and then if you want to pay, then only pay after a result has been accomplished," Urban added.

American Modification Group has gone out of business. The Mendiatas did get a refund of their up-front money 4 months after their modification was denied. Now the couple is left struggling with what to do now to save their dream home.

"We keep going because of these two little ones. We want to give them the best," Juan said.

Additional Resources: 

Colorado's Foreclosure Hotline (877-601-HOPE) is a good place to start if you think you're going to be in trouble with your mortgage. Many mortgage companies won't work with homeowners until they're actually late on their payments, but you may be able to get some valuable advice on what the process is you'll be facing to get help.

(© MMIX CBS Television Stations, Inc. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed.)

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