NorthJersey.com

Lending Nothing But Woe

The Record (NorthJersey.com) — Sunday, July 12, 2009

BY KATHLEEN LYNN
NorthJersey.com
STAFF WRITER

As if homeowners facing foreclosure didn't have enough to worry about, there's another threat to their financial security: companies that charge $1,000, $2,000 or more to renegotiate their mortgages — and then do nothing.

"There are people who promise you everything but deliver nothing," said Phyllis Salowe-Kaye, head of New Jersey Citizen Action, which offers no-cost counseling to distressed homeowners.

In fact, it's not even legal under New Jersey law to charge for loan modification work.

State and federal regulators have cracked down, saying these companies often:

Any request for payment is a big red flag.

"I try to tell people: Do not pay anybody," said Shirley Robertson, a housing counselor with the Paterson Task Force.

"We don't take money from clients. We get funded by HUD," said Sylvine Marabotto of the Consumer Credit Counseling Service in Cedar Knolls.

Marabotto, Robertson and other North Jersey housing counselors tell of clients who have paid $1,000, $3,000 and even $6,000 for non-existent "help" with modifying a mortgage before turning to the nonprofits.

"They're preying on people's panic," said Bruce Morgan, a housing counselor with Urban League for Bergen County.

Under state law, only non-profit social service and credit counseling agencies can serve as "debt adjusters."

In March, the Federal Trade Commission and the State of New Jersey took action against two South Jersey companies: Hope Now Financial Services of Cherry Hill and New Hope Modifications of Bellmawr. The regulators said the companies falsely suggested that they were affiliated with the Hope Now Alliance and charged clients $1,000 or more to negotiate with lenders.

The allegations against New Hope are typical of these cases. New Hope, the suit says, "failed to deliver on its promises of mortgage loan assistance, and failed to provide refunds once consumers realized they were getting nothing for their money," the state said.

In its lawsuit against New Hope, the state tells the story of Juanita Campbell of Linden, who fell behind on her mortgage payments to Countrywide, once one of the nation's biggest mortgage lenders. In 2008, she paid $1,000 to New Hope Modification for help in renegotiating her mortgage, the suit said.

According to the lawsuit, a New Hope employee named Aaron Schulman told Campbell that he was a former employee of Countrywide and knew whom to speak with to get her a better offer from the company. Schulman discouraged Campbell from speaking with her boss, an attorney, about her situation because, he said, he had more experience dealing with lenders, the lawsuit said.

After she paid the $1,000, Schulman allegedly told Campbell he had negotiated a great offer with the lender, but would not give her any details until she paid New Hope an additional $500. After she paid the $500, New Hope told her it had been unable to get any loan modification. She asked to speak to Schulman, and was told he no longer worked for the company.

She asked for a refund, but got back only $1,000 of her $1,500, the state said.

The state said at least 80 victims paid New Hope a total of about $100,000.

"Struggling homeowners were led to believe these companies would help them, but instead the homeowners were exploited," said Department of Banking and Insurance Commissioner Steven M. Goldman.

Calls to lawyers for New Hope and Hope Now were not returned.

"They promise they will work with your lender; they promise you can get all the bad stuff off your credit report and they can make all your debt go away," said Salowe-Kaye.

"The truth is most of the time they do things you could do — or they do nothing."

According to the FTC, homeowners struggling with their mortgages should avoid any company that:

How to avoid con artists

Homeowners in trouble are advised to contact their lenders directly, or work with non-profit counselors certified by the federal Department of Housing and Development. You can find them at hopenow.com or by calling 888-995-HOPE. Or, for help through New Jersey's program, call 888-989-5277 or visit www.NJForeclosureMediation.org.

Top Top | NJCA in the News | NJCA Homepage