Loan modification scams may not be the worst of monetary crimes, but they are certainly in the running. Taking advantage of financially distressed homeowners, the most common form of these scams is this: They take a large up-front fee (in the thousands) and then do nothing, or next to nothing, producing no beneficial results for the beleaguered borrowers.

People who do this are receiving a lot of attention in California. Among those who are looking are the State Attorney General, the Department of Real Estate, the FBI, the California State Bar, and even the California Legislature.

In the spring of this year the Department of Real Estate was investigating more than 750 complaints; nationally, the FBI was looking into more than 2,100 companies suspected of defrauding troubled homeowners; and the California State Bar is currently dealing with more than 800 cases relating to foreclosure complaints. Says the Bar's Chief Trial Counsel, Russell Weiner, "In my 21 years in attorney discipline, I have not seen a crisis of this magnitude. It is truly unprecedented."

Recently, the California State Bar took the highly unusual step of identifying sixteen attorneys who had received "a significant number of complaints" and who were under investigation. (Readers in my market area might be interested to know that slightly more than 2/3 of those attorneys were in Orange County, California). The bar's press release noted that it was highly unusual to go public with the names of those who were under investigation (and not yet found guilty), but in this case the organization was "waiving investigation confidentiality in favor of public protection." (Interested readers can go to www.calbar.ca.gov; or, to see the list of names – too cumbersome to reproduce here – just email me for a link.)

The California Legislature has also weighed in on the problem. The legislation in question (AB 764 – Nava) noted that current law allows both real estate brokers (with procedures approved by the Department of Real Estate) and California attorneys to charge up-front fees for negotiating loan terms. But, within those confines, too much bad stuff has occurred. Hence the passage of the bill on Sept. 28, 2009. It would prevent anyone from collecting advanced fees for loan modification negotiations until a successful result had occurred. The bill would also contain the requirement that any contract for loan modification services must contain specified language that states that it is not necessary to pay someone for attempting to negotiate a loan modification. The statement includes the web address www.hud.gov where a list of free loan counselors may be obtained.

AB 764 had a large number of supporters and no organized opposition. It now sits on the Governor's desk, awaiting his signature. He should sign it.

Half a million people are now in trial modifications under the Obama administration's mortgage rescue plan, but getting them permanent help is proving to be difficult.

The foreclosure prevention plan, which reduces eligible borrowers' monthly payments to no more than 31% of their pre-tax income, requires homeowners to make three on-time monthly payments before they can receive a permanent modification.

Loan servicers use the trial period to verify borrowers' income and ascertain whether they can handle the reduced payments.

But servicers say they are having a tough time collecting the necessary documents to determine whether troubled borrowers should receive permanent adjustments. They contend that some homeowners aren't sending in their tax returns, bank statements and pay stubs. Borrowers, on the other hand, complain that their paperwork is being lost.

The Obama administration recently made several changes to the program to give the transactions more time and streamline the plan.

Last month, it extended the trial period by two months to give servicers more time to collect the documents. And last week, it announced that servicers could automatically move qualified borrowers into permanent modifications without their signatures.

The Treasury Department said these moves should make it easier for qualified borrowers to get permanent modifications, according to a spokeswoman. Officials are discussing ways to make it even easier, she said, including allowing servicers to access tax records directly from the Internal Revenue Service.

It is in servicers' interest to convert eligible borrowers since they only get incentive payments when the modification is made permanent, the Treasury spokeswoman said. Plus, if the government finds institutions to have wrongly deny swaths of people, it could impose penalties.

"Treasury is also working intently with servicers to help ensure that they execute in helping more borrowers convert to permanent modifications," she said.

Servicers say they are wrestling with getting the completed documents they need to put borrowers in permanent modifications.

At JPMorgan Chase, for instance, representatives call and send letters to homeowners detailing what they still need to mail in. The bank says it has improved its system for collecting paperwork so that lost documents are not the problem. The issue, it says, is that homeowners are simply not sending in what's required.

"At first blush, you'd think that for people who've made three payments, it would be a no-brainer to get the paperwork in," said Tom Kelly, a Chase (JPM, Fortune 500) spokesman. "But for some people, it just hasn't been the case."

A Citigroup (C, Fortune 500) spokesman also said the documentation process has been challenging.

But many borrowers and housing counselors contend that homeowners send in their documents multiple times, only to be told their files are incomplete. This has been a problem that's plagued the program from the beginning.

On top of that, housing counselors report that banks are sending homeowners forms with the wrong income data listed, which could jeopardize their chances of getting a permanent modification.

Many borrowers are growing increasingly nervous as they near the end of their trial modification periods with no decision from their servicers.

Jim Copley, a Minneapolis homeowner, was given a trial modification five months ago. He found he could no longer afford his $1,650 monthly payments after the housing collapse decimated his home-painting business.

After receiving a temporary adjustment that cut his payments to $955 a month, Copley sent his servicer, Bank of America, all the required income documentation in June. He was shocked to learn two months later that there was some paperwork missing. He called again and was told that his file was, in fact, complete and that he should continue making reduced payments until he was told otherwise.

"Every time I talk with them, I get a different story," said Copley, a single dad who now makes a third of his previous income selling meat to restaurants. "No matter what I do, I can't get any kind of an answer."

A Bank of America (BAC, Fortune 500) spokeswoman said that Copley's file is complete and that he should receive a decision about a permanent modification soon.

It remains to be seen how many people will qualify for permanent modifications.

"If the trial modifications don't convert to permanent modifications, then the program won't be considered a success," said Barry Zigas, director of housing policy for the Consumer Federation of America.

The U.S. Treasury is poised to announce a finalized plan to expand mortgage relief efforts to include short sales.

A short sale occurs when the bank allows the sale of a home for less than the existing mortgage balance.

It's a strategy to avoid foreclosure, but banks have been more likely to let a home go into foreclosure, rather than short sell it, even if it means holding the property during moratoriums set by some jurisdictions.

That's because short sale bids often come in well below the last appraisal, real estate agents don't want the extra work involved and buyers fear a four-to-five month transaction period that could end in a no-deal scenario.

To help move more distressed properties through the clogged pipeline, the Treasury, under the Making Home Affordable's Home Affordable Modification Program (HAMP) is expected to announce a $1,500 closing cost incentive for those who agree to short sales or deed-in-lieu deals (the deed is transferred to the lender, avoiding the more costly foreclosure proceeding).

The Treasury will also pay the lender $1,000 for accepting a short sale or deed-in-lieu deal.

Earlier this year when the plan was first announced, there was also a provision to pay second lien holders up to $1,000 to relinquish their claim in such transactions.

Thus far, Refinancing Fannie Mae or Freddie Mac mortgages under the Home Affordable Refinance Program (HARP) and HAMP mortgage modifications have been the "go-to" foreclosure options among federal mortgage relief programs.

Some 260,000 homeowners have refinanced under the HARP program since January, according to the Federal Housing Finance Agency.

FHFA also said during the second quarter this year there were 11,700 short sales and 202,200 trial loan modifications under government programs.

American home owners sell and move, on average, every five to seven years. Why do home owners move? People who have lived in the same home for the past 30 years have a hard time understanding this phenomena. They are shocked that people move so often, but I know one thing for certain: Their day to sell and move will come as well.

Here are the top 15 reasons why people sell and move:

• 1) Home is too small. First-time home buyers often outgrow their "starter" homes. Increased family size is the main reason home owners say they need a larger home.

   

• 2) Upgrade. The grass is greener on the other side. People often want what they don't have and long for a bigger, more expensive and grander, upscale home. It's the American way.

   

• 3) Fix purchase error. Owners might believe they made a mistake when purchasing their present home and want to rectify that mistake. Maybe they thought they could get by without a back yard but yearn to garden, or the dining room in the center of the house annoys them, or they no longer enjoy the underbelly of planes flying overhead within inches of their face.

   

• 4) Job transfer. Relocation makes it necessary for many to pull up roots and move. If the commuting distance exceeds an hour, most people would prefer not to spend two hours in traffic every day.

   

• 5) Personal Relationships. Moving in with a partner or getting married can mean one of the parties will need to sell, especially if both owned homes prior to the commitment. On the other hand, break-ups cause owners to sell as well for three basic reasons:
  1. One party may need to buy out the other and not have the cash available.
  2. The home may not be affordable to sustain on one person's income.
  3. The home holds bad memories, making a fresh start desirable.

   

• 6) Neighborhood changes. The neighborhood might have changed for the worse, economically, socially or physically. For example, maybe a freeway was constructed nearby. Maybe the next-door neighbors receive visitors who arrive wearing striped pajamas at 2 AM. Or they have hung sheets over their windows while a skunk-like odor permeates the air.

   

• 7) Empty nest. The kids have grown up and moved out. The owners want a smaller home. The older you get, the harder it is to keep a big house clean.

   

• 8) See family more often. Some people want to be closer to their family as they age and will move to be near relatives. Parents want to be near children. Grandparents, near their children and grandchildren.

   

• 9) See family less often. To put more distance between the home owners and relatives. Some might move out of state to keep harmony within the family. Dysfunctional and fractured families have been known to blossom being separated.

   

• 10) Retirement. Active-adult communities are attracting many buyers over the age of 55. These planned communities have golf courses, club houses, workout facilities, week-end social gatherings, back-yard barbecue parties and more, all designed for people over 55.

   

• 11) Health problems. Physical ailments such as knee or back problems make it difficult for an aging population to climb stairs in a two-story, so a one-story home may be more practical. A trade-off solution for many elderly people who don't require round-the-clock care is to buy a condo or move into assisted living housing.

   

• 12) Deferred maintenance. Some people don't want to put on a new roof, replace the siding or buy a new furnace, so it's easier to buy a newer home. When you figure the life of most home systems is about 15 years, it could make sense to get out before everything goes haywire.

   

• 13) Home improvement perfection. A small segment enjoys fixing up and selling, spending time, money and effort on remodeling, and once the work is completed, these people become restless because there is nothing left to do. Some of you may call these people obsessed, but for some, it's a way to maintain balance while mastering a hobby.

   

• 14) Cash in equity. Some home owners can't stand the fact their home is worth all that money because that money is not in their pocket. These people would prefer to stare at their passbook savings than stare at four walls with empty pockets. They. Just. Want. The. Money.

   

• 15) Lifestyle change. Others are simply tired of owning a home and would prefer to travel, pursue a hobby or be less responsible. We used to call these people misfits or boomers, but many past a certain age want to find a calling that is meaningful to them. So, for these people, home ownership loses its priority status and turns into the ticket for realizing dreams.

Roof certifications are not stipulated in all purchase contracts. For example, many years ago, when I stopped by to supervise the placement of signage for a listing in the Sacramento neighborhood of Land Park, I looked up to catch a neighbor, this little old lady, dashing across the street. She was screaming and frantically flailing her arms. She demanded, "How can you sell this house without a new roof!"

The question struck me as odd. Because Sacramento regulations do not require that sellers replace failing roofs. Some cities have truth-in-housing guidelines and regulations governing repairs before resale, but Sacramento is not one of them. Besides, it was a seller's market. It could be raining into the living room through a hole in the roof the size of a basketball hoop, and home buyers in seller's markets wouldn't blink an eye.

What is a Roof Certification?

Roof certifications are separate from a home inspection. Home inspectors, for the most part, do not perform thorough roof inspections. Instead, roofing inspectors climb up on the roof and issue reports on:

• Possible movement
• Condition of roofing materials
• Ridges, caps and drip edges
• Soundness of drains, downspouts, and gutters
• Flashing around roof pipes, chimneys, vents, valleys and mounting of HVAC units

If the roof does not require repairs, the roofing company will then estimate the remaining years of life for a roof and certify its inspection. The certification is good for two to five years, depending on local custom.

If the roof requires repairs, after the repairs are performed, the roofing company will then issue the roof certification.

Factors Influencing Roof Certifications

Roof inspectors will take into consideration the following:

• Type of Roof

  Common types of roofing materials are:

  1. Composition shingle
  2. Wood shake
  3. Clay or concrete tile
  4. Slate
  5. Metal or steel
  6. Tar and gravel
  7. Synthetic

• Age of Roof

  Roofing companies say that wood shakes often require more repairs if they are older than 10 years. Tile roofs, as long as nobody has walked them -- because weight can cause them to crack -- can last 50 years or more. Composition shingle roofs are often warranted for 20 to 40 years, depending on the quality of the material.

• Roof Pitch

  The steepness of a roof is known as its pitch. The higher the number, the steeper the roof. To calculate pitch, measure one horizontal foot of the roof, following a level horizontal line. Now measure how much higher the roof is at that point, known as the rise of the roof, along a vertical line. If the roof rises 4 inches per foot, the pitch is 4; if it rises 12 inches per foot — a 45 degree angle — the pitch is 12, generally the steepest you’ll find.

  Note that many roofing contractors will charge extra to work on a roof with an extreme pitch.

• Number of Layers

  Some cities have enacted ordinances regarding the number of layers that are allowed on a roof before a complete tear-off will be necessary. In California, it's common to see composition shingles placed directly over wood shake.

• Previous Roof Repairs

  Although not all states require seller disclosures, if a seller does not disclose previous roof repairs, many roofing companies will refuse to honor the roof certification. Roof inspectors will want to examine a previous repair to make sure it was done correctly and won't cause future problems.

Exclusions to Roof Certifications

Most roofing companies will not honor claims due to natural disasters or severe weather -- and these conditions include high winds -- in addition to damage caused by foot traffic or improperly installed skylights or solar panels. Natural disasters, however, are generally covered by either a homeowner's insurance policy or a flood insurance policy.

How Roof Certifications Help to Sell Homes

The basic purposes of a roof certification are to:

• Inform a buyer about the condition of the roof
• Disclose its remaining life expectancy
• Make repairs, if necessary

Many sellers are advised to provide a roof certification to the buyer as part of the sales process. Roof certifications give buyers peace of mind. If sellers refuse to provide a roof certification, and the roof is older, home buyers might decide to pay for their own inspection and make it a contingency of the contract.

In closing, some controversy exists over whether a roofing inspector should also be allowed to perform roofing repairs because of possible conflicts of interest. If a seller is unhappy with the recommendations made by a roofing contractor, I would advise the seller to obtain a second inspection and submit both inspections to the buyer.

It is never too soon for folks who have given up their homes to start pointing to the day when they will once again decide to take the plunge.

Whether you were able to persuade your lender to accept a payoff for less than what you owed and dump your albatross in a short sale or lost everything to foreclosure, if you start rebuilding your credit now, you may be able to buy another place in as little as two years.



"We live in a credit-dominated society, making it especially critical for those with tarnished credit reports to begin the rebuilding process as soon as possible," says Gail Cunningham, spokeswoman for the National Foundation for Credit Counseling in Silver Spring, Md.



It's likely that if you've been tagged by a short sale, foreclosure or bankruptcy, the rest of your credit has gone to seed as well. So follow these tried-and-true tips:

* Review your credit report. You can't know where you are going until you know where you are. So get a free report at www.annualcreditreport.com, and look it over for accuracy.

First, make sure that the information in your file is about you and only you, not someone who has a similar name or a similar Social Security number. Next, look for items about you that are simply erroneous.

If you find mistakes, dispute them. If you discover old debts that haven't been paid off, satisfy them as soon as you can.

* Beware credit-repair scams. By all means, don't pay someone to wipe away the negative items in your file. If they don't follow through, the damaging items will reappear in two or three months.

* Check the status of a short sale. If your mortgage lender has accepted a payoff for less than what you owed, make sure that the account reflects a zero balance rather than the difference between the outstanding balance and the sales price.

Don't assume that your short sale carries no further obligations. Some lenders are filing deficiency judgments, while others are selling the bad debts to investors who then go after borrowers. Also, Uncle Sam can tax the difference as income.

If you are responsible for the remaining balance, make arrangements to repay, follow your repayment plan and make sure the lender carries your account as current.

* Be aware of the effect of foreclosures, bankruptcies and short sales. Bankruptcies tend to have a greater effect on a credit score because they typically involve more than one account, whereas a foreclosure involves just your mortgage, according to Craig Watts, public affairs director at Fair Isaac Corp., the company that devises many of the credit-score formulas used by most lenders. But either way, there's nothing you can do about these extremely weighty black marks against your credit except ride them out.

Bankruptcies and foreclosures remain on your credit report for seven years (10 years for a Chapter 7 bankruptcy). But as these items age, Watts says, they have less and less of an effect.

Just a few years ago, underwriting rules were so loose that you could buy a house just 24 months after filing for bankruptcy. But now, according to Ginny Ferguson of Heritage Valley Mortgage in Pleasanton, Calif., you have to wait five years after the bankruptcy is dissolved, not just filed -- and seven years if you've filed for bankruptcy multiple times.

Lenders tend to look more kindly on applicants who have unloaded homes via a short sale, Ferguson says. In fact, she says, you may be able to get another mortgage in as little as 24 months "if you truly have extraordinary circumstances."

* Maintain checking and savings accounts. Your future mortgage lender will probably want to see two or three months of bank statements.

* Stay current on credit cards.

* Apply for new cards. Having two or three revolving accounts, typically credit cards and an installment, fixed-payment loan (say, for a car), can improve your score, as long as you are current.

Also consider a secured credit card, one backed by a deposit you made with the institution issuing the card. To research the various yardsticks, go to www.creditcards.com or www.bankrate.com.

Don't apply for too much credit at one time. Too many credit inquiries can have a negative effect on your score.

* Take out a small loan. A personal loan from a bank or credit union can serve to reestablish your credit.

* Make sure that your accounts are reported. After going through all this trouble, it would be a shame if your lenders did not report your on-time payment status.