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Modification Business Gets Litigious

Modification Business Gets LitigiousRecent loan modification activity

May 21, 2009

By MortgageDaily.com staff

Pennsylvania has issued cease-and-desist orders against six out-of-state modification companies, while the operator of a modification Web site that appears to be government related is facing legal action in a federal court. A mortgage servicer is accused in a California lawsuit of slandering a firm that was negotiating a modification for one of its borrowers.The regulator of Fannie Mae and Freddie Mac, the Federal Housing Finance Agency, reported earlier this month that loan modifications completed on loans owned or guaranteed by the two secondary lenders increased 26 percent in February. Around 70 percent of those modifications involved interest rate reductions and term extensions.

In a speech last week before the National Association of Realtors, Federal Deposit Insurance Corporation Chairman Sheila Bair said 13,000 modifications were completed at IndyMac Federal Bank while the FDIC was conservator. A universal application of the modification program could impact as many as 3 million borrowers.

In his own comments to the group, U.S. Department of Housing and Urban Development Secretary Shaun Donovan highlighted the Obama administration’s $75 billion commitment for loan modifications. He boasted about 14 servicers with a combined market share of 75 percent that have signed on to the federal modification plan.

“Over the next month or so, we also expect to see substantial increase in loan modifications,” Donovan told the Realtors.

A temporary restraining order was issued on May 15 by the U.S. District Court for the District of Columbia against an unknown company that is pretending to be tied to MakingHomeAffordable.gov, the Federal Trade Commission announced this week. Borrowers searching online for the free government assistance program were diverted with misleading sponsored links to a commercial site that charged for modification fees.

The order requires search engine providers including yahoo.com, msn.com and altavista.com to identify those who paid them to place the ads. It also requires the search engines to ban sponsored search ads with ‘MakingHomeAffordable.gov’ or any other domain name containing ‘.gov.’

“When consumers searched for ‘making home affordable’ or similar search terms, the defendants’ ads prominently and conspicuously displayed the Web site address ‘makinghomeaffordable.gov,'” the FTC said.

Legislation signed by Michigan Gov. Jennifer M Granholm will give borrowers an additional 90 days to modify their loans, a statement today said. The new law takes effect in 45 days and freezes foreclosure proceedings for 90 days for delinquent borrowers who commit to the modification process and consult a state-approved counselor. It requires lenders to notify borrowers in writing about the default and who to contact.

Six out-of-state modification companies have been ordered by the Pennsylvania Department of Banking to halt unlicensed activity, according to a news release today. The companies allegedly advertised modification services for Pennsylvanians on their Web sites.

Cease-and-desist orders were issued against ApplyLoanMod.com, ClearHomeRelief, HomeForeclosureFighter and U.S. Loan Assistance Center — all California companies, Pennsylvania said. In addition, orders were issued against Florida’s Mortgage Solutions Clearing House and Oklahoma’s American Foreclosure Specialists.

The newly launched BytePro Loan Modification Edition is an all-in-one software tool for processing modifications under the Treasury’s Home Affordable Modification Program, Byte Software said this month. The system handles the process from the initial borrower contact to the completion of the loan modification.

Leadsnet Inc. reported last week that requests for commercial mortgage loan modifications has steadily increased since launching its CommercialModification.com.Web site in January. The average loan amount is around $2.5 million, and the average loan-to-value is 80 percent.

A borrower who complained online about United Law Group has since endorsed the Irvine, Calif.-firm, a May 13 announcement said. John Wright reportedly engaged United to represent him on modification to his mortgage with Countrywide Home Loans Inc. But when the borrower himself subsequently called Countrywide, he was told that they never heard of the firm and that he had been scammed.

“Come to find out not more than two days after dealing with Countrywide and the online thing I got a letter stating United Law Group was representing me, from Countrywide,” Wright was quoted as saying.

United noted that it has since filed a lawsuit in the Superior Court of the State of California County of Orange Central Justice Center against Countrywide and parent Bank of America Corp. claiming the defendants “deliberately and maliciously sought to harm United Law Group’s reputation with its clients in order to stall and mislead the consumer with the idea that the consumer would lose confidence and cancel with United Law Group.”

Federal Trade Commission, Plaintiff, v. One or More Unknown Parties Misrepresenting Their Affiliation With the Making Home Affordable Program, Defendants.
Civil Case No. 1:09-cv-00894, FTC File No. 0923147, (U.S. District Court for the District of Columbia)

United Law Group, Plaintiff, v. Bank of America and Countrywide Home Loans, Inc., Defendants.
Case No. 30-2009 00121999 (Superior Court of the State of California County of Orange Central Justice Center)

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