As a result of the mortgage and foreclosure crisis, there is a sprouting of a new type of business which that tout “loss mitigation consulting,” “foreclosure prevention,” “mortgage loan modification,” and similar services. According to the Department of Banking and Insurance, there is a rising number of advertisements, direct-mail solicitations and other marketing materials offering
The Department has also seen solicitations to licensees and to attorneys to partner with companies that purport to offer such services. These companies offer help to delinquent borrowers by obtaining payment plans, loan modifications, short sales and deeds in lieu of foreclosure. Mortgage bankers, brokers and solicitors have been targeted by these businesses for the purpose of gaining referrals.
What is a Loan Modification?
“A loan modification involves modifying the terms of an existing loan, typically to make it more immediately affordable for a borrower in default or in imminent danger of default, for instance because of a scheduled rate increase. The terms commonly modified are the interest rate and/or the term of loan. A loan modification is not a form of mortgage loan refinance or second mortgage activity,” per the Department of Banking and Insurance.
The
A "debt adjuster" is a person who either (a) acts or offers to act for a consideration as an intermediary between a debtor and his creditors for the purpose of settling, compounding, or otherwise altering the terms of payment of any debts of the debtor, or (b) who, to that end, receives money or other property from the debtor, or on behalf of the debtor, for payment to, or distribution among, the creditors of the debtor. [N.J.S.A. 17:16G-1c(1)].
If you have a business, you may enter into a loan modification if you are:
a) The lender or owner of the loan; or
b) The mortgage servicing company, acting as an agent for the loan’s owner; or
c) An entity licensed by the Department as a Debt Adjuster under the Debt Adjuster Act; and
d) Other entities that are exempt from Debt Adjuster licensure, as set forth at N.J.S.A. 17:16G-1c(2):
The following persons shall not be deemed debt adjusters: (a) an attorney-at-law of this State who is not principally engaged as a debt adjuster; (b) a person who is a regular, full-time employee of a debtor, and who acts as an adjuster of his employer's debts; (c) a person acting pursuant to any order or judgment of court, or pursuant to authority conferred by any law of this State or the United States; (d) a person who is a creditor of the debtor, or an agent of one or more creditors of the debtor, and whose services in adjusting the debtor's debts are rendered without cost to the debtor; or (e) a person who, at the request of a debtor, arranges for or makes a loan to the debtor, and who, at the authorization of the debtor, acts as an adjuster of the debtor's debts in the disbursement of the proceeds of the loan, without compensation for the services rendered in adjusting those debts.
For Consumers, be wary of:
a) Payment of exorbitant upfront fees for services available from a proper source for free or at minimal cost;
b) Loss of fees paid, with no services rendered, and/or no protection from financial loss under a surety bond (Debt Adjuster licensees are required to be bonded in the minimum amount of $50,000.);
c) Loss of precious time in the midst of a default or foreclosure process;
d) Loss of title to the home without any real benefit, under certain scams; and
e) Further damage to credit profile.
The Department will investigate complaints relating to unlicensed persons offering loss mitigation consulting, foreclosure prevention, loan modification and similar services and will pursue appropriate remedies.
