A yearlong undercover investigation conducted by four fair housing organizations, including one in Connecticut, has identified the common sales tactics used by loan modification companies to entice homeowners to use their services.
The investigators, which included the Connecticut Fair Housing Center, say the tactics used by the loan modification company’s amount to “corrupt,” behavior used to try to take money from vulnerable homeowners.
Of the 80 companies investigated it was found that:
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55 percent required an upfront fee to start work or required a low initial fee to conduct minimal work on behalf of distressed homeowners, such as reviewing loan documents;
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43 percent guaranteed or promised they could secure a loan modification even before learning about the homeowners’ financial limitations;24% advised or encouraged homeowners to stop making their mortgage payments or to stop contacting their lenders;
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16 percent guaranteed a new, much lower interest rate ranging between two and 6 percent on modified loans;
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12 percent discouraged homeowners from seeking free help from governmentâapproved housing counseling agencies;
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8 percent encouraged homeowners to provide fraudulent information to their lenders.
In light of their findings, housing center officials are calling on the Federal Trade Commission to strengthen their oversight on the industry.
