National Notary Now Issue #133
FTC: Some Companies Seeking Notaries To Give Appearance Of Legitimacy
Attorneys general across the nation are advising Notaries to avoid working for “suspicious” companies offering loan modification or rescue services for a fee. Notaries are increasingly being courted by unscrupulous firms to perform improper and even outright illegal acts related to “mortgage rescue,” “foreclosure relief” and “loan modification;” but these companies have come under intense scrutiny by federal and state authorities for driving a nationwide spike in fraud.
Banks have been working this year to modify loans to keep millions of families out of foreclosure. But many corrupt, third-party companies have emerged to exploit the surge in foreclosure relief efforts. These firms offer to “intercede” with a lender on a homeowner’s behalf for a hefty fee up-front — then disappear without helping, often leaving homeowners in worse straits than before. The problem is so pervasive that Melissa Weikel of the California Attorney General’s office said, “Notaries who accept work from any of these companies that charge fees for their services run the risk of potentially associating themselves with prosecutable actions.”
Notaries In The Middle
Notaries are reporting that many of the assignments from these firms do not involve notarization, and come with suspicious requests. Notaries, typically, are asked to collect the up-front fees from homeowners or other non-notarial tasks. William H. Gimbel, president of Vista National LLC, a firm that provides Notary services for the mortgage industry, is urging Notaries to stay away from any suspicious offer of work. If a loan modification company is taken to court, the Notary who collected the fee for the company also could be held culpable, he said.
Frank Dorman of the Federal Trade Commission (FTC) said some companies are seeking Notaries to give them the appearance of legitimacy. Notaries should follow the same precautions as consumers when approached by a loan modification firm, he said, encouraging Notaries to review information on the FTC’s Web site to help spot bad companies.
A Big Problem
Loan modification fraud has become so widespread that the FTC teamed up with authorities in 23 states this summer to initiate nearly 200 lawsuits against suspect companies. A number of states have also passed strict laws to deter loan modification fraud, and others are considering similar legislation. One of the most common elements in these laws is a ban on up-front fees. While many states permit exceptions for attorneys and licensed real estate professionals, California recently enacted an across-the-board ban on advance fees.
There are legitimate organizations helping borrowers. Tom Kelly of Chase Manhattan Bank — which has performed 200,000 loan modifications since the spring — said many lenders, including his bank, often provide the same kind of assistance to borrowers for free. He added that Chase often works with nonprofit agencies that don’t charge homeowners for help.
One of the most telling indications of the fraud problem came earlier this year when California Attorney General Jerry Brown ordered 386 loan modification companies in the state to post a $100,000 bond and register with his office. As of October 15, only one of the companies has complied, said Weikel, manager of the Attorney General’s Public Inquiry Unit.
