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Officials Warn Against Unregistered Loan Mod Consultants

A number of state officials have urged loan modification consultants to register their businesses in an effort to bring more focus to the industry and reduce the risk of loan modification and foreclosure scams.

In Southern California, Attorney General Jerry Brown threatened to take criminal action against 386 foreclosure consultants unless they officially register with the state and post a $100,000 bond. The bond, according to spokesman Scott Gerber, is meant to cover consumers if a civil case and resolution turns up.

Twenty-seven loan consultants were also asked to provide proof of the claims they made in direct-mail ads, where many claim to have helped thousands of borrowers or saved them substantial amounts of money in loan modification deals.

Southern California has one of the most active loan modification and foreclosure consultancy networks in the country, making it an easy target for scammers. According to reports, 8 out of 10 unregistered consultants are based in a Southern California county.

Brown posted a list of unregistered companies on his website, where struggling homeowners can check for legitimacy before working with private companies and independent consultants.

Mortgage planner Christopher Lamm believes Brown’s action is meant to filter out companies that are only after the income opportunity. With many people just grabbing at the income opportunity, he says, the loan modification industry has suffered a high failure rate.

Brown has given unregistered loan modification firms a week to register and post the bond. Those who fail to comply may be fined anywhere from $1,000 to $25,000 per violation and face up to a year of imprisonment.

Experts say that the best course for troubled homeowners is still to work directly with their lenders. Those who choose to work with a third-party company, they added should take time to make sure they are legitimate.

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