NY’s Attorney General Cuomo & The Loan Modification Industry

“In many ways, the entire industry is a scam, in my opinion,” New York Attorney General Andrew Cuomo said during a news conference Tuesday. That’s what the second sentence of Randi Marshall’s Newsday article said on June 9^th. Cuomo was announcing that he would be filing a suit against a company offering loan modification services to troubled homeowners on Long Island.

Then, proving to me that he was completely ignorant and insensitive about the situation he is investigating, Cuomo said: “No one has to pay for this service.”

Well, alrighty then. At 48 years old I have just been shown the country’s first service that ranks up there with breathing oxygen. No one should have to pay for it. What’s wrong with this guy Cuomo? Did he famous father drop him on his head as a baby? I don’t remember his father being a moron.

To give you an idea of how nutty this whole loan modification industry thing has gotten, try to take Cuomo’s words above and substitute some other service for “loan modification”. Which other professional service should no one EVER have to pay for? Anyone? Anyone?

Why should no on ever have to pay to have someone with specialized expertise negotiate with their bank for a modification of their mortgage? This is the same clap-trap President Obama was yammering about a couple of months back. Why does anyone think this?

Let’s look at the options:

A. Call a Nonprofit Organization – When a consumer calls a nonprofit organization, the taxpayers are paying for the service… it’s not “free”. And some nonprofits don’t actually negotiate for the customer’s modification, they simply help the customer get their paperwork together and introduce them to their bank, which is kind of like getting tee’d up, if you ask me.

B. Call Your Bank Directly – When a consumer calls their bank directly, the bank is paid by the taxpayers to modify the mortgage… so it’s not “free”. In addition, I have in my possession, paperwork from Washington Mutual showing a “Loan Modification Fee” of $1500 that was charged to a customer in April for modification of their mortgage by the bank directly.

C. Do it Yourself – I’ve spoken to dozens of homeowners who have had their mortgages modified themselves and every single one of them said it was a very time consuming process for several months. That doesn’t sound free to me… but that’s just me.

D. Hire an Expert – When you hire a firm to help you obtain a modification, you pay that firm between $1,000 and $4,000 to handle the job for you. Is it just me, or does three grand for saving your home sound incredibly cheap? The truth of the matter is that if I knew nothing of this subject matter, and you asked me to guess at how much it would cost to hire a firm for such a purpose, I would guess twice that amount.

An Entire Industry is a Scam?

How can Cuomo have the opinion that “the entire industry is a scam”? I mean, even the Department of Real Estate and State Attorney General in California both readily admit that there are legitimate firms operating throughout California. In fact in California, the AG recently asked that all loan modification firms register with his office and post a bond in the amount of $100,000. Why would he do that if all are “scams”.

How can Cuomo, who holds such an obviously distorted view, now consider himself qualified to handle the investigation of loan modification companies? If a judge said something like this, wouldn’t he be disqualified from hearing cases related to loan modification companies as a result of his blatant bias?

With Cuomo being the State of New York’s top cop, doesn’t this statement open up any judgments that result from court proceedings against loan modification firms to appeal, at the very least? I’m not a lawyer, but it would seem that such a bias would taint any prosecution. Just like if a police officer is shown to be an outspoken racist, it taints that officers arrest of the minority group he arrests? No? Am I missing something here?

In Marshall’s article, it states that Cuomo “issued subpoenas to 13 other loan modification companies, for information on fees, contracts and marketing”. In his filing against Amerimod, Uniondale-based loan modification firm, Cuomo accused Amerimod of illegally charging upfront fees and producing misleading advertising sent to homeowners facing foreclosure.

I spoke with the owner of Amerimod, Salvatore Pane, who said that his firm has to-date, completed more than 10,000 loan modifications for homeowners. Other loan modification companies in the area confirm that Amerimod is one of the largest, of not the largest, so whether you believe Mr. Pane’s claim or not, it seems clear that his firm has certainly completed thousands of loan modifications for homeowners. That doesn’t fit my definition of the word “scam”. Marshall reported that Pane said that he is following state laws, which is the same thing he told me.

I feel I have to take a moment to clearly state my personal definition of the word “scam,” because I’m concerned that Mr. Cuomo has a different one in mind when he uses the word. To me a “scam” is when you get ripped off. You pay someone money and receive no value in return. You fail to receive what was promised you. That’s a scam.

And while I detest the idea of troubled homeowners being “scammed” by unscrupulous operators, it seems to me that Mr. Cuomo is much more concerned with someone being scammed out of three thousand dollars than he is someone losing their home to foreclosure. Why is it that I NEVER read a story of an enforcement action that states the number of homeowners that a loan modification company has saved?

Marshall’s Newsday article stated:

Cuomo’s effort, combined with proposals for expanded regulation, could mean a smaller loan modification industry, said housing counselor Joan LaFemina of the Community Development Corp. of Long Island. “My hope is that the people who stick with it really have integrity, but knowing the industry the way it is, there will always be those who operate under the radar and take advantage of the situation,” LaFemina said.

To her credit, Marshall also quoted Joseph Romano, office manager at Farmingdale-based National Modification Service, which has not been cited by Cuomo, as saying that Cuomo’s comment about the entire industry being a “scam” was “a great insult”. According to Marshall’s article, Romano said: “I stop foreclosure auction sale dates that normally would not be stopped if the client tried on their own.”

Hundreds of thousands of homeowners across the country call private sector loan modification firms every single day. They’ve all heard the same rhetoric we’ve all heard about these firms all being scams, yet they continue to call. Why would this be the case?

Because they know better, that’s why. They’ve tried to call their bank directly and they got nowhere. They didn’t qualify for the president’s program. They didn’t get what they needed by calling a nonprofit. So, when they feel they’ve exhausted all other options, they ask others, or hear an advertisement, and they call a private sector firm for help. If we allow this witch hunt to reduce or eliminate the number of legitimate private sector loan modification firms, we will have reduced the avenues available to today’s distressed homeowner… and that’s what leads to people being “scammed”.

When people feel they have nowhere to turn for help saving their home, they write a check to any port in the proverbial storm. It’s not really the con artists that make a scam an effective one. They need people in a near panic. When we’re in a panic, scared to death that we will lose our most treasured asset, we don’t make good decisions. We don’t feel that we have time to do our due diligence. And we get scammed as a result.

So, go ahead Mr. Cuomo. Continue to charge blindly forward, and in the name of protecting the people of New York, reduce the legitimate options that homeowners have for saving their homes from foreclosure. And what you will accomplish is more homeowners being scammed, not less. More homes lost to foreclosure, not less. And a longer and deeper economic recession that will cause even more homeowners to be at risk of foreclosure, which will only further destabilize our nation’s banks. Brilliant work, Mr. Cuomo, absolutely cracker-jack work.

Clearly, our state and federal governments have failed us at every turn in our nation’s still worsening housing crisis. And now they are abdicating their responsibility to regulate an industry’s legitimate operators… an industry that is so obviously needed by hundreds of thousands of homeowners… because they say they can’t tell a legitimate firm from an illegitimate one? Their job is to figure out how to properly regulate the private sector in order to help protect consumers, not engage in some biased witch-hunt that eliminates the good with the bad.

People have the right to representation if their property is to be taken away, Mr. Cuomo. Isn’t that what is states in the Fifth Amendment to the U.S. Constitution? “No person shall be deprived of life, liberty, or property without due process of law.” Doesn’t due process include the right to representation?

Nothing’s “free,” Mr. Cuomo. If there’s a God in Heaven, someone in you family… someone without your connections… will fall into our country’s widening abyss. They’ll be at risk of losing their home, and they’ll call their bank directly. Or try a nonprofit solution. And when they run out of options, they’ll call you for help. Then maybe you’ll wake up to what’s really happening in this country. Because you clearly have no idea what’s going on in “real life” today.

People needed help getting their mortgage in the first place, and they paid someone for that assistance. But for some reason, even in the face of overwhelming evidence to the contrary, your deficient brain has told you that we should all be able to negotiate a modification of that mortgage without help and without cost, something that’s much harder than obtaining a mortgage in the first place. You’re either a dolt, Mr. Cuomo, or you’re in someone’s pocket. There’s simply no other explanation I find plausible.

You want to know why we hear about the “scams,” but never the stories of private sector firms having saved homeowners from foreclosure? Because when we’re losing our home we feel ashamed and we don’t tell a soul outside our closest friends or family members. So, when a private sector firm saves our home from foreclosure, we have no one to tell, we don’t want to think about the horror of being at risk of losing our home… we just want to move on.

Think about that Ms. Marhall and Mr. Cuomo. Investigate that next time. I have. And I can tell you that your current understanding of the situation is inadequate and markedly incomplete.

Here’s a link to Randi Marshall’s Newsday article. I spoke with her a couple of weeks ago and she told me that she was only interested in writing a balanced piece on the loan modification firms. You’d have to judge that for yourself, but I do have to say that her article on Cuomo was more balanced than most.

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