From the Washington State Department of Financial Institutions:
DFI Advises Homeowners To Verify The Licenses Of Anyone Offering Loan Modification Services Before Hiring Them
OLYMPIA – The Washington State Department of Financial Institution’s Consumer Services Division advises homeowners who are delinquent on their mortgage to be cautious about using the services of someone offering to help them work with their lender to modify the terms of their home loan.
The Department of Financial Institutions (DFI) has received a number of inquiries regarding the legality of providing this service in this state. While there is nothing inherently illegal about this business, those providing this service in the State of Washington must be licensed as loan originators, mortgage brokers, or consumer loan companies and be overseen by the Department of Financial Institutions. Additionally, under applicable law, the loan modification provider associated with mortgage brokers have a fiduciary relationship with the borrower and must act in their best interest.
“DFI is concerned that homeowners in desperate situations may pay substantial fees for loan modification services and not take advantage of the HUD-approved counseling services offered for free by numerous non-profits,
Jillayne, the practice of law is more than just the preparation of documents. As I mentioned in the other thread the practice of law includes:
(1) Giving advice or counsel to others as to their
legal rights or the legal rights or responsibilities of
others for fees or other consideration.
(4) Negotiation of legal rights or responsibilities on
behalf of another entity or person(s).
http://www.courts.wa.gov/court_rules/?fa=court_rules.display&group=ga&set=GR&ruleid=gagr24
So I don’t think just handing this off to attorneys to do the paperwork would be the solution (assuming it is unauthorized practice).
Dealing with a loan modification is a completely different animal than brokering a loan. About the only similarity is that the person getting a new loan might be in some sort of trouble or dispute with their existing lender. Your solution brokering a loan, however, isn’t negotiating with that existing lender, but instead paying them off and getting a new loan in place. When you get that new loan in place you don’t negotiate with the new lender, you look for the new lender with the best terms for the borrower. And you live with those terms, you don’t try to negotiate new ones. About the only advice you give is whether the new loan is better than the old one.
Thank you for calling Dewey Cheatham Howe & Moore Loan Services. How can I help you?
Jillayne, it sounds like DFI is merely advising consumers to make sure that if they’re working with an LO who’s promoting a loan modification service, that they’re licensed w/DFI. I’m not seeing where it’s a requirement (as the title to the post states).
I get so many email requests from Loan Mod companies begging for referrals of consumers in trouble and offering big bucks if I send them their way. The loan mod biz has to be one of the most predatory fields out there…not only are they preying on consumers facing financial jeopardy, they’re counting on LO’s being desperate as well.
I’m sure there may be some legit loan mod services out there… I’m having a hard time understanding what the LO would do to warrant the fees.
I wonder if DFI’s motivation to getting the word out is to help consumers stay away from unlicensed (or those who have had licensed revoked) LO’s and secondly, to take a good look at the licensed LO’s who would venture into that type of “service”.
Did anybody else catch this interesting analysis from Housing Wire?
It holds a bit of GOOD NEWS for WA state.
http://tinyurl.com/HW-foreclosure-myths
“…top 5″ states for foreclosures, we arrive at the following: Florida (+9.81), Michigan (+3.74), Nevada (+3.70), Ohio (+3.18), and Arizona (+1.48).”
“The nation’s best states, then, include New York (-3.49), Washington (-1.9), Maryland (-1.86), New Jersey (-1.54) and Massachusetts (-1.52). ”
positive numbers BAD, negative numbers GOOD.
Our pro sports team may suck, but (so far), we are paying our mortgages.
From DFI:
“those providing this service [loan modifications] in the State of Washington must be licensed as loan originators, mortgage brokers, or consumer loan companies and be overseen by the Department of Financial Institutions.”
Roger wrote: “Did anybody else catch this interesting analysis from Housing Wire? It holds a bit of GOOD NEWS for WA state. . . . Our pro sports team may suck, but (so far), we are paying our mortgages.”
I don’t think there’s any inverse correlation there between housing and local teams. Especially if you throw in the Husky and Cougar men’s football teams. 😉
Thanks, Jillayne…I missed that (comment 5). I’m surprised that DFI is permitting loan mods. I guess I just have a real mental block with this issue.
” I’ve surveyed 10 attorneys and so far almost all of them are quoting in the $1500 range for a loan modification. Some charge more if there are more liens on title. Why pay that fee, along with a separate fee to an LO?
Why pay a loan mod salesmen $3500, $4000, and upwards of $5,000 for something you can get for $1500 from a person with a law degree whose conduct is heavily regulated by the Bar? ”
Is that a flat fee?
Or is it by the hour?
Do you have to pay even if they can’t get your loan modified?
I have seen homeowners who were charged by the hour by attorneys adding up to thousands of dollars.
It takes 50, 60, 70 hours to get a loan modification approved.
Are there really attorneys out there working that many hours for $1500?
Is DFI actually telling people that are in bad loans that the only option they have for resolution are the same professionals. The same mortgage people and attorneys who closed their transaction to begin with?
Hi Carter,
The $1500 quoted is a flat fee. The terms of the fee would have to be discussed between client and attorney.
“I have seen homeowners who were charged by the hour by attorneys adding up to thousands of dollars.”
Many loan modificaiton salesmen use this statement as a way to counter the objection to the $3500-$5000 upfront fee charged by loan mod salesmen.
A homeowner is better served by calling their state bar and receiving a referral to LOCAL legal counsel and having a conversation with an attorney for himself/herself, instead of listening to a person with a vested interest in steering the homeowner away from an attorney.
I’m guessing attorneys are charging less because it takes them less time to perform the same work.
If a company is taking 50 to 80 hours to complete a loan modification, in my humble opinion, that company has no idea what they are doing and is wasting the homeowner’s time and money.
“Is DFI actually telling people that are in bad loans that the only option they have for resolution are the same professionals. The same mortgage people and attorneys who closed their transaction to begin with?”
Well now let’s take a look at how you’re setting up that question. Of course DFI wouldn’t say that, come on.
DFI is directing homeowners to FREE HUD APPROVED HOUSING COUNSELING AGENCIES. Go to the website and read it here:
http://www.dfi.wa.gov/consumers/news/2008/loan-modification.htm
The Washington State Department of Financial Institution’s Consumer Services Division advises homeowners who are delinquent on their mortgage to be cautious about using the services of someone offering to help them work with their lender to modify the terms of their home loan.
The Department of Financial Institutions (DFI) has received a number of inquiries regarding the legality of providing this service in this state. While there is nothing inherently illegal about this business, those providing this service in the State of Washington must be licensed as loan originators, mortgage brokers, or consumer loan companies and be overseen by the Department of Financial Institutions. Additionally, under applicable law, the loan modification provider associated with mortgage brokers have a fiduciary relationship with the borrower and must act in their best interest.
“DFI is concerned that homeowners in desperate situations may pay substantial fees for loan modification services and not take advantage of the HUD-approved counseling services offered for free by numerous non-profits,
@Carter “Is DFI actually telling people that are in bad loans that the only option they have for resolution are the same professionals. The same mortgage people and attorneys who closed their transaction to begin with?”
In Washington state, the majority of transactions are closed at title company escrow departments or independent escrow companies, not attorneys.
In addition, as of June 12, 2008 Loan Originators working under a mortgage broker owe fiduciary duties to their clients.
Homeowners are in a much better position when using a licensed Loan Originator v. an unlicensed loan mod salesman.
I am both attorney and mortgage broker. I do mortgage modifications. They are time consuming and the legal and mortgage issues are complex.
An experienced attorney-based modification group can effect a better modification than a non-attorney-based modification group. As attorneys we go directly to the bank’s legal department, not to the loss mitigation department. We do not beg. We threaten legal action.
I have had discussions with the DFI about who is authorized to do modifications. The DFI claims jurisdiction over the area because RCW 19.146.010 (10) authorizes mortgage brokers to “negotiate” mortgages as well as to “originate” mortgages. Hmmm?
The DFI says brokers and loan officers can do modifications. Does that mean attorney cannot or that they must also have a loan officer license?
The DFI says that loan officers can do modifications. Left unanswered is whether the loan officer must do the modifications under his broker and whether fees must be paid to the broker and not directly to the loan officer. Does the loan officer doing a modification have to report modifications at the end of the year as is required of mortgage brokers?
Another issue is whether real estate agents can do modifications. Some organizations enrol real estate agents to do the marketing work to bring in the modifications. Some organizations say anyone, with no license of any kind, can do marketing work to bring in the modifications and receive referral fees. Are those who do mere marketing exempt, and may they receive fees? Any time marketing is being done, there is actual consultation being done, so I would say no.
I would say that anyone getting paid fees should have at least some kind of license, morgage broker, loan officer, or attorney, to indicate a degree of knowledge and responsibility. What kind of license should be required I have not decided.
The entire field is a bit confused right now.
James, whatever the Washington Supreme Court would say would trump the statute DFI is citing. Basically the court defines the practice of law, and the legislature cannot do anything about it. So the court could say that this is the practice of law and the statute allowing loan officers to do these things is unconstitutional.
I really doubt real estate agents are authorized to do these things. That seems well outside the limited practice rules that the court set up for agents.
There is no reason that someone can’t provide a needed service and do it upright and not get paid for it. This is crazy when one thinks you must be an attorney or you can’t get the same results. I totally disagree with those statements.
I know of a firm in Ohio that has been providing workouts for homeowners for the past twenty years and it has respresented attorneys, doctors, housebuilders, nurses, school teachers, daycare workers and many others as their client base and has thousands of personal references from homeowners and businessowners stating these facts: we called this operations and that one and even went to the so called non-profits for help but were turned down or we could not get approved.
Then we found out about this Ohio firm and they resolved our problem. One would think is would be down right unconstitutional to put such an operation out of business but that is what the Ohio Attorney General’s Office is trying to do. How sad is that? When we researched the firm they only have one open complaint and five closed. WOW! With all the mess going on and people being foreclosed on it looks like the State of Ohio could find better things to waste taxpayers dollars on. But since the firm has been around so long they are trying to set an example for all the others that try or want to provide foreclosure mediation negotiation services in Ohio under an outdated unjust Debt Adjusters Act and the Consumer Sales Practices Act. Speaking of social control……God help us!
Concerned Homeowner