Former Subprime Brokers are Turning to Loan Modification for Profit

July 20, 2009 - By Tomek Pilch

It's one of the more ironic stories of the current state of the economy, that the very same people that got many of us into this mess, are now promising to help consumers get out of it. A recent FTC lawsuit, filed against a company called FedMod, has turned up some interesting trends in the mortgage and loan modification businesses. Once making a killing selling sub-prime loans to people who had no business buying a million dollar home, this same company is now promising to help those very same people renegotiate their loan terms with the lenders to help avoid foreclosure.

The problem is, that many of these loan modification companies are claiming to be "law firms", or at least marketing themselves that way, in order to get around a California Law that would otherwise prevent them from collecting any money up front for their services.

Loan Mod Companies are Posing as a Law Firm

Many "loan mod" companies simply hire an attorney so that they can use the bar license to market themselves as a law firm. In reality, the people that consumers end up working with and paying, are non other than the same people that sold them the bad loan in the first place. In a sense, they've helped create the mortgage mess in the first place (and made a lot of money doing so) and now they're using it to me even more money.

The FTC lawsuit claims that companies such as FedMod often fail to deliver, exagerate their success rate, suggested that consumers stop paying their mortgage, and failed to issue refunds for the lack of service. It seems that more often than not, consumers are paying up front for a service that the company often fails to provide.

Always talk to a Lawyer for Help Avoiding Foreclosure

Consumers should be aware of these companies, and be certain that they are dealing with an actual law firm. Foreclosure attorneys can help negotiate with lenders, and offer home owners solutions to stop foreclosure and help keep their home.

Read this New York Times article for more on the subject