Some Loan Modification Firms Have Their Own Financial Baggage

In Hampton Roads, Virginia, The Virginian Pilot recently did a story on some of the upfront fee loan modification firms that have recently sprouted up locally. The owner of one firm who was interviewed for the story reportedly described her business model as one where she charges from $500 to $1,500 upfront, collects basic information from the homeowner, and then passes along the file to an attorney who then tacks on an additional fee for handling the actual negotiation. When asked how many homeowners she has helped obtain successful loan modifications, she told the reporter that because her buisness was new, she hadn't helped any yet (which reportedly contradicts the testimonials from satisfied customers that appear on the firm's website).

Before she opened her loan modification firm, she owned a now-defunct subprime mortgage business that currently is a defendant in a civil mortgage fraud lawsuit, according to the story. She claimed that the suit was due to the actions of an employee and that she had no knowledge of those actions. In addition, she apparently was unable to reach successful loan modifications on her own distressed real estate, as the story reports that her recent bankruptcy filing indicates that three houses she owned were repossessed by banks, and that she offered to give up three additional properties as she liquidated her assets in a Chapter 7 bankruptcy.

For the story, see As mortgage services pop up, regulators warn of scams.