Law to ease risk to homeowners using modification companies
SALEM, Ore. – New laws passed by Oregon's state legislature may help ease the risk homeowners face when they use loan modification companies. The laws passed Jun 26, 2009. Many became effective immediately.
Already strapped with other financial problems, Arlene Forral feared she’d lose her Southeast Portland home after she got sick last year and had to take time off from work.
“I have three kids,” she said. “If they take my house, I have nowhere to go.”
She still made mortgage payments, but she also applied for a loan modification with her bank. She was turned down four times. Then she heard about a local loan modification company called E-Loan Settle registered at a Southwest Portland address.
She paid the company about $3,500. Then, since she heard that if she stopped making mortgage payments she would get higher priority with the bank, she stopped paying her mortgage.
Forral did not pay her mortgage for five months. Still, the bank denied her loan modification application again.
She finally received not a loan modification but a much lesser “partial claim.” That's where the bank lets her add missing payments to the end of her loan.
Forral said she’s back to where she started, with the same payments, and the same problems. But she’s out the $3,500 she paid to the loan modification company.
She did ask for her money back. However, Kevin Kloewer with E-Loan Settle said no.
“Based on the contract, what we performed, I think we did our job,” he said.
The federal government says a “partial claim” is not a loan modification and it does not reduce monthly payments or reduce the principal. E-Loan Settle said a “partial claim” counts under its contract, which Forral signed.
“We performed everything we stated we would do in the contract,” Kloewer said. “We did our job. That’s all I really need to say about that.”
However, Oregon’s new law means that companies like E-Loan Settle have to change their tactics.
Under the new law companies have a limit on what they can charge. In Forral’s case, the company would only be able to charge her about $300.
Also, the new law says loan modification companies can charge more money only if they actually get the bank to lower the principal loan amount.
Companies can ask for 7.5 percent of the money they saved on that loan. Since Forral received a partial claim, she would have to pay nothing more.
Forral said she hopes she can keep her home, and E-Loan Settle said they want to follow all the laws in regards to loan modifications.
“There’s plenty of business here and there’s plenty of people within this region that need help,” Kloewer said.
Forral filed a complaint with the Oregon Department of Justice and state investigators are looking to see if E-Loan Settle broke any laws under last year’s regulations.
People can apply for loan modifications themselves and E-Loan Settle said it informs people they can do it themselves.
Links for foreclosure and home loan modification help: