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Economic News

Beware the Bandwagon!

First come the radio spots, then TV commercials, then infomercials – the first indication that a new industry has been born from a changing economy.  The housing crisis and woes faced by a plethora of borrowers about to lose their homes has begat the newest craze – Loan Modification Services.

Opportunity or Opportunistic?

We are now seeing a proliferation of firms that charge fees for what they promise will be quick results to negotiate with lenders to get affordable loan terms.  Unfortunately, some less-than-ethical folks see this crisis as a way to scam desperate homeowners with false promises of modifying loans.  In many cases, the firms take the homeowner’s money but never deliver the services promised.

Considering jumping onboard?

This offers an interesting opportunity for real estate agents to help clients and friends – by providing a referral to a valuable service, and the opportunity to earn some extra income.  

Avoid the charlatans!

After watching a local investigative-type journalist outlining an above-board company, I spoke with Cynthia Mitchell an affiliate for Home Loan Preservation  a nationwide legal network that specializes in Home Loan Modifications.  She offered a few pointers for agents that want to point people toward a legit company, or become an agent and earn some residual income “It’s important to ask the following six questions.  If the company answers ‘no’ to any of them, do not use them”

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1. Will a licensed attorney be contacting my lender on my behalf?
2. Are fees guaranteed as fully refundable if the attorney is not successful in modifying my loan?
3. Will I have constant, transparent communication/updates from the attorney to track progress?
4. Is the company registered and compliant with state and federal departments?
5. Will all fees and timelines be disclosed up front?
6. Should I continue to make payments?

Conflict of interest?

I could see it argued both ways.  Mitchell has seen a comfort level among agents in making referrals to homeowners in search of the service “The real estate agents we work with don’t have the sense the homeowner blames them for their issues.  It seems that is typically directed toward the bank.” 

Is a service necessary?

According to William Apgar, a senior adviser to Shaun Donovan, President Obama’s new secretary of housing and urban development “Borrowers don’t need to pay anybody.”  Ironic, that many have made the same argument around realtor’s service.  But I digress …

The rebuttal

“I find Mr. Apgar’s point of view interesting,” Mitchell commented, “we continually hear that the problems homeowners now face are due in large part to homebuyers’ naiveté in the home buying process.  If one has difficulty making a good decision on a purchase transaction, how can we expect them to understand the legal intricacies in the loan modification process?  How can they be sure their interests are being served without a lawyer driving the transaction?  You know the banks have plenty of lawyers guiding them.”  

Time will tell

Unfortunately I know a number of people that have tried and failed to contact their lender directly, or, were told the lender wouldn’t discuss options until the loan was in default.  I’m sure both scenarios will be played to death by the media in the coming months.  

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What do you think?

Will you take a page from big companies to “expand your share of wallet” by expanding your service offerings?  Is this something you’ve considered as an extension of your services?  Or do you see it as a conflict?

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Written By

Brandie is an unapologetically candid marketing professional who was recently mentioned on BusinessWeek as a Top Young Female Entrepreneur. She recently co-founded consulting firm MarketingTBD. She's held senior level positions with GE and Fidelity, as well as with entrepreneurial start-ups. Raised by a real estate Broker, Brandie is passionate about real estate and is an avid investor. Follow her on Twitter.

13 Comments

13 Comments

  1. Mark Eckenrode

    March 26, 2009 at 10:07 am

    i can’t think of a more timely topic for folks. great job, brandie

  2. Mark Eibner

    March 26, 2009 at 2:16 pm

    we’re at it again Beware the Bandwagon!: Get out of your feed reader and comment on this post- .. https://tinyurl.com/dnk9to

  3. Real Estate Feeds

    March 26, 2009 at 2:17 pm

    Beware the Bandwagon!: Get out of your feed reader and comment on this post- we PROMISE that the ShamWow guy won.. https://tinyurl.com/dnk9to

  4. Tommy

    March 26, 2009 at 2:22 pm

    Interesting: Beware the Bandwagon! https://tinyurl.com/dnk9to #journalist reporting

  5. sheilabragg

    March 26, 2009 at 2:25 pm

    Beware the Bandwagon!: Get out of your feed reader and comment on this post- we PROMISE that the ShamWow guy won.. https://tinyurl.com/dnk9to

  6. Walid Muhammad

    March 26, 2009 at 2:35 pm

    Reading: “Beware the Bandwagon!” (https://twitthis.com/met9rn)

  7. Mark Eckenrode

    March 26, 2009 at 4:06 pm

    looking to get your home loan modified? @brandiei has some timely tips on how to avoid the charlatans https://bit.ly/JJtSN

  8. Missy Caulk

    March 26, 2009 at 9:02 pm

    I’ve been helping a few clients with loan modifications that they were unable to get any attention from the home sellers.

    In both cases the homeowners were responsible, intelligent folks who did not buy over their price range.

    Both lost jobs, or one partner did.

    It is a real ordeal dealing with Authorization forms faxed multiple times, waiting a week, then being told they never got it but yet I have the fax confirmation sheet.

    errrrr….

  9. Bob

    March 26, 2009 at 9:47 pm

    After July 1st in California, most of the people doing loan mods today will be breaking state law.

    That said, depending on the lender, there isnt much negotiating that can be done. It’s their call.

  10. Mark Eckenrode

    March 27, 2009 at 12:25 am

    @brandiei you’re welcome. it’s a shame so many will get taken to the cleaners by loan adjustment weasels https://bit.ly/1apnmL

  11. Brandie Young

    April 9, 2009 at 5:23 pm

    Hi Mark – it is timely, and I think a topic we will see a ton of discussion around in coming months…

    Missy – I can’t imagine what a pain that must be! In talking with Cynthia for this article I couldn’t believe the level of detail! Ugh.

    Hi Bob – thanks for chiming in here. Re the legal comment, that’s what I understood from Cynthia Mitchell. Though I didn’t dive too far into it, she stressed the importance of licensed legal professionals. Time will tell how these mods will go.

  12. Ben Nicolas

    April 29, 2009 at 1:40 am

    Re: requiring a licensed attorney to negotiate with the bank: How does hiring an attorney who specializes in say “Environmental Law” or “Personal Injury” benefit a client as opposed to hiring a licensed Mortgage or Real Estate broker that battles with Loss Mitigation & Asset Managers on a daily basis, working short sales/loan mods and has years of experience qualifying homeowners and intimate knowledge of local RE values? In my state, CA, what most attorneys are doing is essentially renting their license to out of work, unlicensed ex sub-prime Loan Officers. I’ve heard that the CA state bar is going to start cracking down on this loophole being exploited by way to many attorneys to enable RE & Mtg brokers to circumvent the CA Foreclosure Consultant laws which prohibit taking up front fees from homeowners with a recorded NOD.

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