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Campaign targets mortgage modification scams

NeighborWorks America's national effort to educate troubled homeowners kicks off in Los Angeles.

October 27, 2009|Alejandro Lazo

A national housing nonprofit has launched an education campaign in Southern California to combat scams targeting homeowners in peril of foreclosure.

Loan modification fraud is on the rise, costing troubled homeowners thousands of dollars up front for mediation and counseling services that are provided free by federally approved nonprofits, Eileen Fitzgerald, chief operating officer of NeighborWorks America, said Monday at a news conference on the steps of Los Angeles City Hall.

Washington-based NeighborWorks is starting its yearlong national education effort in Southern California because the region has been hit particularly hard by the foreclosure crisis, she said.

Troubled borrowers often pay fees ranging from $1,500 to $3,000 for help in reducing their mortgage payments, Fitzgerald said. The companies, in turn, promise to negotiate with their lenders on their behalf. In some cases the companies promise that loan amounts will be modified, a result that is difficult and rare, she said.

In addition to money paid to unscrupulous companies, those facing foreclosure can lose precious months that could be better spent with federally approved nonprofit counselors who don't charge for their services, Fitzgerald said.

Poorly informed homeowners desperate for help turn to loan modification consultants -- who often are attorneys, mortgage brokers or real estate agents -- advertising on radio and television and in print.

"They are very good marketers," Fitzgerald said.

California Atty. Gen. Jerry Brown's office has reported receiving more than 2,500 complaints against loan modification consultants and businesses through Oct. 14 of this year, up from 163 in all of 2008.

Seniors, Latinos, African Americans and Asian Americans have been particularly victimized and will be a focus of the education campaign, Fitzgerald said.

For the next three weeks, community organizers and volunteers with NeighborWorks and its local affiliate, Los Angeles Neighborhood Housing Services, will be distributing marketing materials to warn people about loan modification fraud. The first stop Monday was the WorkSource center in Sun Valley.

"Many of these families believe they have nowhere to turn, nowhere to go for help or assistance," Los Angeles Mayor Antonio Villaraigosa said at the news conference.

In April, the Los Angeles City Council passed an ordinance imposing penalties on companies that charge for such services.

Zulma Navarrete said that over the last year she had bad experiences with two loan modification companies.

The 36-year-old native of Guatemala, speaking in Spanish at the news conference, said the first company charged her about $2,000, and the second, a law firm, charged her $3,495. Neither has persuaded the lender to reduce the $2,900 monthly payment on her three-bedroom Huntington Park home.

Navarrete said she got her money back from the first company but not from the law firm.

"I was robbed," she said. "And I want my money returned."

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alejandro.lazo@latimes.com

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