Many subprime lenders have changed sides and have become loan modification firms as they try to cash in on the mess they helped create. Let’s take Pac West Funding as an example. In 2007, Pac West Funding CEO Curtis Melone watched as rival subprime mortgage brokerage firms collapsed under the declining housing market. Fearing his company would be next; Melone restructured his business to a loan modification firm “dedicated” to aiding people facing rapidly ballooning payments on loans many could not afford in the first place. Melone renamed his company Green Credit Solutions. Many loan brokers who lost their jobs in the housing market collapse also went into the mortgage modification business which provided a way of cashing in on the problem they helped create. Many of these firms, including Green Credit Solutions have since been shut down and are now facing state and federal investigations. Customers paid Green Credit thousands of dollars for loan modifications that never happened. Green Credit was taking their money but was doing nothing in return.
So if you are considering a loan modification, here are some red flags you should watch out for:
- A company/person asks for a fee in advance to work with your lender.
- A company/person guarantees they can stop a foreclosure or get your loan modified.
- A company/person advises you to stop paying your mortgage company and pay them instead. Note that you should never send a mortgage payment to anyone other than your mortgage lender. The minute you have trouble making your monthly payment, contact your lender.
- A company/person you don’t know asks you to release personal information online or over the phone.
- A company/person pressures you to sign over the deed to your home or to sign any paperwork you haven’t had a chance to read or don’t fully understand. A legitimate counselor would never pressure you to sign something you don’t understand.