“Foreclosure Rescue Firms Under Scrutiny”

Newsday reports today that federal and state regulators are aiming to rein in loan modification firms that target homeowners in danger of foreclosure. One New Yorker turned to South Brooklyn Legal Services (a program of Legal Services NYC) for free legal assistance after paying one such modification company thousands of dollars without results.

"Scammers are taking advantage of people in a difficult situation . .
." FTC chairman Jon Leibowitz said in his April announcement.

Nonprofit housing advocates note that state and federal laws also don't regulate how much companies can charge.

"There's no reason on earth that you would pay for a loan modification
when there are free services," said Meghan Faux, who heads foreclosure
prevention at South Brooklyn Legal Services, which provides free legal
assistance to individuals across the region.

After months of trying to get mortgage relief using American
Modification Agency, Brooklyn resident Rolett Brown is now working with
South Brooklyn Legal Services to try to get back the $5,600 she paid
AMA, based in Hauppauge and founded by executive Salvatore Pane. He
also owns Amerimod, a separate Uniondale company that's Long Island's largest modification firm.

Brown, who needed help after the monthly payment for her adjustable
rate mortgage rose to $3,700 last July, said she paid AMA last summer,
using two credit cards and a loan from her retirement fund. Her loan
modification application was denied – twice.

AMA wanted to try a third time. Brown said no. Then, she said, she
connected with city officials and her bank's representatives and was
able to get the changes she needed on her own.

AMA hasn't refunded her money, she said. "I feel betrayed," Brown added.

The article notes that in addition to a new push for regulation at the federal level, here in New York legislators have proposed a bill that would require loan modification firms to register with the state and tighten guidelines on upfront fees. On May 14th, Johnson Tyler, Director of the Social Security/Consumer Rights Unit
at SBLS
testified before members of the New York State Assembly, praising the bill
itself as a step in the right direction, but cautioning that the fee
schedule proposed in the legislation is too lenient to deter debt
settlers from seeking easy money from desperate and unwitting
consumers.

Click here to read the full June 2nd Newsday article.