Mortgage Loan Modification Companies Beginning To Draw Attention From Feds, Lawmakers

In Modesto, California, The Modesto Bee reports:

• The Justice Department is gearing up to probe potential scams targeting distressed homeowners in the San Joaquin Valley. On Friday, Rep. Dennis Cardoza, D-Merced, urged Attorney General Michael Mukasey to investigate mortgage-reduction schemes marketed in the region.(1)

• For an upfront fee, homeowners are being told their monthly mortgage payments can be renegotiated. At best, the homeowners may end up paying for work that's available for free. At worst, they'll pay for work that isn't done at all.

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• The questionable solicitations come in different ways. Phone calls offering mortgage negotiation services have been ringing through the San Joaquin Valley for several months. [...] Official-looking letters are arriving in valley mailboxes, some citing congressional bill numbers or phone numbers for a "loss mitigation department."

• And Thursday in Modesto, some homeowners attended a workshop in which they were asked to pay $3,500 to get their mortgage woes resolved. Typically, the companies offer to renegotiate a mortgage in exchange for an upfront fee amounting to one month's mortgage payment, or more.

For more, see Loan-help schemes scrutinized (Claims to fix mortgages for fee set off red flags for the feds and Cardoza) (may require free registration).

(1) It may be that, in California, the services marketed by these operators may already be regulated under the state law regulating the conduct of foreclosure rescue operators who provide mortgage consulting services to financially distressed homeowners. The law, among other things, specifically prohibits the collection of an upfront fee. For the law, see California Mortgage Foreclosure Consultants Act - Section 2945 through Sction 2945.11 of the California Civil Code, as recently amended this year by AB 180, Mortgages: foreclosure consultants.