Asbury Park Press

Mortgage-Modification Advice Available Free Of Charge

Asbury Park Press — Thursday, March 26, 2009


The phone call from a mortgage-modification company last fall couldn't have come at a better time for Roy and Ilene Smith. The Hazlet couple was in debt and needed relief.

For $2,700, New Day Financial Solutions of Newark said it would help them lower their mortgage. They just needed to let the home fall into foreclosure, which would force the lender to work with them, Roy Smith said.

Five months later, Smith sounded displeased. "I want the $2,700 back," he said.

Homeowners in distress are getting swamped with solicitations from companies offering to help modify their mortgages — even though experts say there is plenty of free advice available.

"A homeowner will receive on average 250 cards and letters from folks who try to do business with families in distress," said David Petrovich, executive director of the Society for the Preservation of Continued Homeownership, a nonprofit group in Ocean Township. "The key is to not immediately rush into paying for a service without first reviewing the decision with someone else."

The Smiths are far from alone. The housing market began to collapse in 2007, when buyers couldn't keep up with their escalating mortgage payments and went into default. It sent the economy into a tailspin. Home prices fell. Consumers stopped spending. Workers lost their jobs. And foreclosures rose even more.

To stem the tide, President George W. Bush visited Freehold Township last year and launched a program called the Hope Now Alliance. It called for troubled homeowners to contact one of several nonprofit counseling agencies. The counselors then would negotiate with the homeowners' lenders for affordable payments.

President Barack Obama earlier this month revised the program to allow homeowners whose mortgages are owned by Freddie Mac or Fannie Mae to refinance and take advantage of record-low mortgage rates. Obama also gave lenders financial incentives to modify the loans of other homeowners risking foreclosure.

It opened the door to a new industry, some of which has come to the attention of law-enforcement officials. The Federal Trade Commission on March 17 filed lawsuits against two New Jersey companies — Hope Now Modifications LLC in Cherry Hill and New Hope Modifications LLC in Mount Laurel — alleging the companies falsely advertised that they were part of the Hope Now Alliance.

The government said both companies required homeowners to pay an upfront fee, called a "mitigation escrow fee," before the companies would work with them. Company officials couldn't be reached for comment.

The Smiths are teachers who have lived in their Hazlet townhouse for more than 20 years. But their incomes declined after they left their jobs due to disabilities. And their expenses — from helping their son go to college to paying medical bills — only grew.

Still, they kept up with their monthly mortgage payment of $2,745. It's made up of two loans — an adjustable-rate loan at 8 percent and a fixed-rate loan at 9 percent.

Smith said he got a call in October from New Day Financial with the promise of reducing his mortgage by $500 a month or more. The first step was to stop making payments and let the house fall into foreclosure.

It wasn't as outlandish as it seems. Experts say that before Obama's plan was announced, lenders didn't work with anyone still making their payments. The Smiths agreed to give it a try and wrote a check to New Day Financial.

In retrospect, the Smiths could have had almost all the work done for free. Phyllis Salowe-Kaye, executive director of New Jersey Citizen Action, said she refers homeowners to the U.S. Housing and Urban Development's Web site,, which has a list of more than 50 agencies in New Jersey alone that offer foreclosure avoidance counseling.

New Jersey Citizen Action is one of them. "It should be free except for the cost of the credit report," Salowe-Kaye said. "That's the only fee we can charge."

"The homeowner's very first step should be to contact your lender and make the application for that help yourself," said Petrovich, who also has written a book called "Fight Foreclosure!"

"It will be frustrating because the lenders are still not equipped to handle the calls. You'll speak to many different people many different times. But you have to go through that."

Roy Smith said he realized his mistake when he called a lawyer, who advised him to make the payments and stop the foreclosure. He then called New Day Financial to ask for a refund, but he said the refund took weeks.

New Day Financial's Web site said the company was purchased by World Financial International, and New Day would stop soliciting business on March 20.

A call to the office was answered by Ejike Uzor, an attorney who said the company was no longer called New Day Financial; it was called Uzor & Associates.

"We had a misunderstanding with them," Uzor said Tuesday. "They didn't want us to continue with them, so we issued them a refund."

Smith said a courier arrived Tuesday with his refund. He said he plans to use the money to pay his taxes and credit-card bill.

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