Subprime Lenders Find Trouble in ‘Fixer’ Role
Many loan brokers lost their job during the subprime crisis, in which too many bad home loans were issued leading to record high numbers of defaults. But some lenders are back and have decided to focus on the mortgage modification business, trying to help the home owners they once put into bad loans.
“Some of the same people who were involved in luring people into loan origination schemes years ago are now back,” Benjamin B. Wagner, a Fresno-based U.S. attorney who co-chairs a nationwide multi-agency mortgage fraud task force, told MSNBC. But some are finding themselves in trouble with the law again.
For example, PacWest Funding once provided loans to home owners but in late 2007–during the height of the subprime crisis–restructured the company. They relaunched as Green Credit Solutions, a loan modification firm that set out to help borrowers who faced rapidly ballooning payments on loans they could not afford.
The company is now being investigated by state and federal officials after customers complained they paid thousands of dollars for loan workouts that never happened. Green Credit Solutions, which had 6,400 loan modification files when state officials raided its offices in late 2009, has since shut down.
In another example, Bernardette Perry of Synergy Financial Management Corp., recast the company as Loss Mitigation Services Inc., a foreclosure relief firm. But regulators say the company did little to help its 1,400 clients who paid $5,500 each. Perry has since been banned from working in the loan modification business.
Source: “Subprime Lenders Remake Themselves as Fixers,” Associated Press (Jan. 2, 2011)
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Countrywide Offers Help to Former Customers
Bank of America, which acquired Countrywide Financial Corp., one of the most active of the subprime lenders, has begun issuing checks to its borrowers who are eligible for foreclosure assistance under an agreement with attorneys general in 40 states.
Borrowers most likely to be eligible for assistance must have experienced a foreclosure, short sale, or deed-in-lieu of foreclosure after taking out a Countrywide mortgage.
Rust Consulting, a third-party administrator, is managing the program, and notifying and paying eligible customers.
Source: Reuters News, Steve Eder
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