But United is just one of literally hundreds of alleged foreclosure rescue operations that have prospered in the toxic wasteland of the mortgage market bust. Reilly Dolan is familiar with many of them. He is the FTC's assistant director for financial practices and the coordinator of "Operation Loan Lies," a joint federal-state effort that has targeted 189 companies allegedly running mortgage modification or foreclosure prevention scams. The FTC alone has brought or settled 19 cases against firms of this type in the past 12 months, said Dolan in an interview. "And more are coming."
"This is now one of the top priorities" at the FTC, according to Dolan, because the sheer breadth of mortgage foreclosure problems "has caused a lot of scams to come out of the woodwork."
Kirtz, who is based at the FTC's Atlanta office, said even well-educated, financially knowledgeable consumers can fall prey to loan modification and foreclosure prevention rip-offs because "they are in a very vulnerable state," threatened with the loss of the roof over their head. As a result, they don't ask the questions they should, and they don't look for the clear warning indicators of potential fraud. What telltale signs should tip off financially distressed homeowners?
No. 1: If the company claims to be able to guarantee success in preventing foreclosure, no matter what your financial situation or mortgage details, don't listen further to the marketing pitch. Nobody can guarantee you'll get a loan modification, and nobody can guarantee that your lender won't pull the plug and foreclose.
No. 2: Although there is no federal law against collection of upfront fees for loan modification assistance -- unlike so-called "credit repair" operations, where fees are prohibited until services are completed -- any company asking for $1,000 to $4,000 in advance should be checked out thoroughly by the homeowner before sending in any money.
"We can't say all advance fees are illegal," said Kirtz. But when the fees are for things like "processing" and "administration" costs, "in most case they're probably bogus."
Finally, mortgage modification companies that claim to have special inside connections allowing them to make your payments directly to your lender -- provided you send your monthly checks to the modification company, not to your regular servicer -- is almost certainly intent on just one thing: Cashing as many of your checks as possible, pocketing the money, and leaving you unprotected on the conveyor belt heading for foreclosure.