Loan Modification Scams are Illegal- unless you’re a Major Bank of course.

By William Hudson

The websites of the Office of the Comptroller, FDIC, Department of Justice, Attorney General and FBI provide numerous resources and services for consumers to report loan modification scams. The information on these websites state that it is unlawful to promise a loan modification and illegal to require payment in advance of a modification being accepted. Homeowners who feel they have been victimized by a loan modification scam are encouraged to report the perpetrators. However the complaint form is geared towards reporting small time scammers and there is no form to report the major banks that are the biggest perpetrators of modification scams in the country.  The FDIC lists loan modification scams they have successfully prosecuted- but predictably not one big bank has been prosecuted.

Last week five California men pled guilty to a loan modification scam that fleeced more than 400 troubled homeowners that were seeking the assistance of the Home Affordable Modification Program. According to the Special Inspector General the men targeted, “struggling homeowners and made a series of misrepresentations to get them fork over thousands of dollars in exchange for supposed home loan modification assistance.” Excuse me but how is this any different than what the big banks have been doing with their HAMP modification scam?

When will the headlines read, “Last week, fifty executives from Bank of America, CitiMortgage and Wells Fargo pled guilty to a loan modification scam that fleeced more than 5 million troubled homeowners that were seeking the assistance of the Home Affordable Modification Program”? When one of the big servicers (Wells Fargo, CitiMortgage, Chase) agrees to modify a homeowner’s loan and then revokes the agreement after accepting months of payments from a homeowner (knowing they had no intention of modify the loan)- why are they not held to the same standard as the scam artists?

A double-standard exists for the “Too Big to Jail” crowd. The complaint forms online are engineered for complaints against small modification operations instead of allowing homeowners to use the same complaint form to report big banks that deceive, renege and commit fraud on unsuspecting borrowers. Why are the big banks allowed to pretend they intend to modify a loan when they don’t? How can it be legal to accept payments and then apply the payments without the homeowner’s approval to late fees or a suspense account (instead of to principal or interest)? Even more unlawful is the fact that servicers claim they have the right to modify loans when they don’t, and then string borrowers along while playing a game of cat and mouse with the documents- knowing all along the mouse doesn’t have a chance in hell of receiving a loan modification.   In many cases, the fees paid to servicers are HIGHER if they are servicing a loan that is in default.  This situation creates a conflict of interest, since a servicer will profit by dragging out a default situation through modification to increase the fees that they earn.

As usual, Government and law enforcement choose to focus on the small players and not the large banks that are the true culprits of this scam. Instead of attacking the low man on the totem pole, why not go after the big guns who are perpetuating massive fraud on the American public by using modification as a payment claw-back tool and a way to create a faster and larger default?  HAMP provides false hope and exploits the homeowner who is already vulnerable and suffering from life events that have resulted in financial duress.

The low-level predators in this particular scam included Roscoe Ortega Umali and his co-conspirators who convinced their victims to send “reinstatement fees” and “trial mortgage payments” to participate in HAMP, a Treasury Department program. The scammers pocketed $3.8 million from October 2012 to September 2014. The big banks follow the exact same business-crime model and have convinced millions of homeowners to do the same thing the scammers advocated with essentially the same poor rates of modification- while pocketing untold millions from unsuspecting homeowners who didn’t receive a modification. Why should the law make distinctions between two groups who are effectively involved in the same scam just because one is a bank? This double-standard is reflected in the fact that if you forge documents to steal a house you commit a felony and spend 7 years at Club Fed, while when a bank forges a mortgage note it is considered a “bad business practice”.

“Umali and his cohorts made false claims of operating a non-profit company, brazenly used the U.S. Treasury seal on fabricated documents, and invented fictitious HAMP benefits,” according to Christy Goldsmith Romero, Special Inspector General for the Troubled Asset Relief Program. She announced the guilty pleas on Wednesday. Okay Ms. Romero, would you like to explain why TARP has focused on the low hanging fruit while banks who have been rescued by the American taxpayer are doing the same on a much larger scale? Why is it okay for the big banks to do essentially do the same thing as the “scammers” with no oversight or punishment?

The scammers contacted homeowners through nationwide mass mailings much like the big banks do. It is not unusual for a distressed homeowner to receive multiple offers to modify their mortgage from the servicer of their loan.  The scammers did “nothing to help modify any mortgages,” according to the IG. “Instead, they used the victims’ payments for their own personal benefit and to further the fraud scheme.” This is exactly what the big banks have done but they have harmed way more than 400 homeowners- in fact TARP has helped less than 30% of all homeowners who have applied for loan modifications. Like the scammers in this story, the big banks use the victims’ trial modification payments for their own personal benefit and to further the fraud scheme. However, while the scammers ran a micro-HAMP fraud program, the big banks operate a macro-HAMP fraud program- and the Special Inspector General looks the other way.

The big banks have engaged in a scheme where they accept borrower’s trial payments under HAMP to obtain a loan modification when the homeowner would have been better off using those funds to retain an attorney or renting a moving truck. It is in the banks’ best interest to offer a trial modification they know will not be approved in order to obtain payments from the homeowner while also increasing the amount the servicer will receive when the home is foreclosed on.

The five defendants were indicted last October and they will be sentenced this summer. Each faces a maximum penalty of 20 years in prison. Meanwhile the bankers who offer HAMP modifications with no intention of offering a permanent loan modification provide false hope, take payments under false circumstances, and force homeowners further into arrears.

There is evidence that the big banks are also using other types of assistance programs to foreclose.  CitiMortgage is known to offer a “traditional” or ” in-house” modification called a repayment plan.  The homeowner will make three payments as required according to the repayment agreement as CitiMortgage concurrently makes arrangement to foreclosure (dual-tracking).  Despite concrete evidence that the homeowner has a contract with the bank in which all elements of a contract are fulfilled (acceptance, consideration, a meeting of the the minds, etc.)- CitiMortgage will then revoke the modification without reason and provide no way to appeal.  Later on CitiMortgage will claim that the modification was a HAMP modification and blame the denial on the investor (Fannie or Freddie)- when they received no such denial from the investor.  The big banks are much more creative and destructive than the scam artists are- and are doing so in direct conflict with the American taxpayer who bailed them out for their fraud scheme.  HAMP has been a diabolical disaster from day one and so has the oversight for this program that was never intended to provide wide-scale relief.

HAMP has accomplished former Federal Reserve Chairman Timothy Geitner’s goals of ‘greasing the runways’ for the banks to foreclose in a methodical manner. HAMP is not an opportunity for homeowners to modify their loan insomuch as it is a program for banks’ to extort payments, prey on the fragile hopes of homeowners in distress, while increasing servicer profits when the home is foreclosed. The scammers lacked the corporate persona, the political connections and government and taxpayer backing, but when you look at their business model- they are surprising alike.


18 Responses

  1. […] via Loan Modification Scams are Illegal- unless you’re a Major Bank of course. — Livinglies’s… […]

  2. California has over $300M from the national settlement 4 years ago. Gov. ‘Moonbeam’ Brown allocated that to pay down state housing bonds, and got taken to court. Then Kamala Harris(D) from San Franwacko was elected the state attorney general. Court found Brown out of bounds (and bonds) and forced him to reverse the transaction. No charges filed (surprise!) by Harris against Gov. Brown(CA – D). That’s $300,000,000 of attorney fees unavailable to the couple in the story. Harris is up for election to replace Sen. Diane Feinstein (CA – D), who is married to the banker Richard Blum, who has his hands in the High Speed Train to Nowhere as well as dealing with real estate for the Fed Post Office.

    Any reason the workforce of California shouldn’t expect to die on their feet working as indentured servants to the banks? Any reason a story like this shouldn’t be front page news?

    You can’t fix stupid, especially when it applies to over 50% of the population who keep re-electing their overseers.

  3. To trespass unwanted:
    I disagree with you when you say folks are only reporting against the “low-hanging” fruit. I complained to the OCC, HUD, the Consumer Protection Section of my Atty General’s Ofc, my State Rep, & anyone else I could that I (foolishly) thought would have an interest in the illegalities going on.
    One even wrote back saying, “Thank you for informing us.”
    When I wrote them again the reply was to hire a lawyer!
    The response from EACH was, “Sorry. You may want to hire a lawyer.”
    My Ag’s ofc had proof in their hands, yet still did nothing other than to advise me to hire a lawyer.
    If I could have afforded one after losing my business, I would have been able to make my pymts & avoided foreclosure!

    As stated in this article, even the complaint forms are geared away from reporting the big banks.

  4. Excellent article.
    I have to believe the reason the big banks don’t get prosecuted like the “low-hanging fruit” (such as in this article), is that big revolving door at the very top levels. (Remember Eric Holder & Jamie Dimon’s one-on-one meeting behind closed doors resulting in a settlement so low that Jamie received an $18.5 million bonus for it from Chase?)

    I’m truly sick of hearing that the “recession” is over as well as the housing crisis. Banks are STILL foreclosing, but it doesn’t even make the news these days. That’s “old news”, now, it seems.

    I’m surprised that no one has made mention of those killed in Park County, CO (my former county, before Chase stole my home there) during an eviction last month.
    But like I said. I guess that’s old news now.

    The Sheriff’s Deputy was the first killed in the line of duty in that large county.
    The homeowner was also killed, but not before shooting three deputies. One died, another was seriously injured but survived, while the third suffered minor injuries.

    Most blame the homeowner who was foreclosed upon & I in no way agree with his taking a life in defense of his home he’d fought in the courts for (to no avail).
    I believe, however, some of the blood should be on the hands of the banksters. Were it not for their illegal ways it never would’ve happened. That homeowner had found the end of his rope & had lost all hope.

    While I don’t condone his actions, I can say I know exactly how he felt.
    The Sheriff’s Deputies were standing outside my door 4 years ago. My life has been a nightmare ever since, as I was left with nothing–at age 64.

  5. @anonymous – don’t hold your breath. BONY didn’t have standing and their foreclosure mill took my house and property with fabricated documents.

  6. Countrywide and it’s servicer HomEQ did the exact same thing to us – why aren’t any of them in jail or being prosecuted? Oh that’s right – Angelo Mozillo got a slap on the hand and then sold the servicing rights to Bank of American and BONY. HomEQ ‘approved’ us for a loan mod, took close to $10,000 of our money and didn’t apply it anywhere that a forensic auditor could find and then promptly closed up shop. My mortgage wound up with BONY and in the hands of the foreclosure mill of Shapiro & Burson (now Brown – Burson got canned). They showed up to court in Baltimore County on three different occasions with two completely different sets of forged and fabricated documents. My attorney (who argued this fact) told me later that he’d have his license handed to him for such brazen fraud on the courts. Baltimore County didn’t seem to have a problem with the fabrications and backdating, etc.

    It took them five years and all of my resources but they finally handed my waterfront property and house to a greedy asshole of a guy who wanted it so badly he waited the five years while I fought. I ran out of money and nearly ruined my 30+ year marriage. Thank you Shapiro & Brown from my daughter who will not be getting a wedding reception. We drained our 401k defending that property I am sad to say.

  7. My wife formally complained to the FBI that neither BONY nor the SLS has a standing to be our mortgagee as the assignment was fraudulent. No reply yet !

  8. @ gordon forbes ,

    Do you have any new news on OCWEN? or is this the SEC investigation into farming out debt collection

  9. My opinion is these agencies go after the people they have complaints on, and the people aren’t complaining on the big banks.
    The people can blame no one else. If the complaint does not exist, those agencies are not going to go looking for problems because they will be accused of acting outside of their delegate authority.

    They are missing the witness, and arm chair witnesses are not the same as witnesses who actually post ‘what happened’.

    Trespass Unwanted, Creator, Corporeal, Life, Free, People, Independent, State, In Jure Proprio, Jure Divino

  10. Nasty stuff Louise. But how could any of our lawmakers have seen it coming?

  11. FYI, on the Panama Papers: Hope there is a lot more fallout from this.

  12. I have been through all this going on 53 months now of fighting nasty old Bank of America. FNMA, CFPB, all Colorado agencies- including the GOV. Office, Fraud office, and really sad but the USAG ALL turn a deaf ear and many won’t even respond:(

    I might have finally stumbled across one Senator here in Colorado (Sen. Corey Gardner) who might actually be able to help me on one loan anyway, as his office contacted FNMA and immediately got a reply and grant of a trial period at a low rate for 3 months- the BIG JOKE is B of A with the crooked Janeway lawfirm has postponed the sale twice since the original date of March 2, 2016 and now have it set for May 11, 2016 per the Montrose County Recorded, Janeway got fined $1 million dollars for their overcharges and deceptive practices regarding foreclosures here in Colorado in late 2014 and they are still going strong. I think they and other lawfirms are bankrolled by the big lenders by continuing to agree to file false and inaccurate foreclosure documents.

    I don’t think we can get anywhere without having some major support by reputable and honest lawfirms (if there are any ha ha) pulling together in a huge nationwide class action suit and hopefully the same for lawmakers and Congress people who will put up a fight for all us property owners. Rule 120 in Colorado needs to be repealed immediately so borrowers have standing to fight for their rights. Just my humble opine. Semper Fi

  13. Louise, the UK’s Cameron is not looking to good in the Panama deal.

    But I have little doubt that short of some step-downs and reshufflings, the stance will be that there’s nothing wrong with stashing a billion or so tax-free here and there. The little people shouldn’t concern themselves over such matters.

    Imagine the leader of a nation bilking his own country….unbelievable – lack of scruples. They are all sociopaths. And they’re ripping off their own citizens.

    It reminds what’s been said many times about Bill Clinton, that he’ll shake hands with you while pissing on your leg.

  14. OCWEN is doing this too, even as they are indicted

    Sent from my iPhone


  15. Amen Neil, Jp Morgan Chase. Has their own version called “champ”. They reneged twice on me. With first the Hamp and then the Champ and have driven me into the hole. There was a federal class action in Boston where the plaintiffs accused chase of breach and it was settled for money and the attorneys for plaintiffs have collected and moved on and being a part of the class action we were promised new loan mods and certain fees would be wiped out and what did me the homeowner get, absolutely nothing.

  16. That is well written. What are the Panama papers?

  17. Well weitten

  18. The double standard for banks and servicers but not for thee still lives on, and it has been eight years. The release of the “Panama Papers” is very telling in that no bank or wealthy entity/person from the UK, France, New York, USA, etc. was targeted/released. Where are the remaining papers with the remaining incriminations?

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