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AMERICAN FORK -- The sudden closure of a Utah County loan modification company has left several clients in danger of losing their homes.
The doors of Modify Utah's American Fork office located on east Utah Valley Drive were shuttered this week, leaving clients wondering what will happen to their homes. The company had been in the business of "assisting customers to obtain loan modifications of their home mortgage loans."
After the holiday break, customers who called to check on the status of their cases instead got a recording that said, "We regret to inform you that Modify Utah is closed and will no longer be open for business."
While customers may have been surprised to find out about the closure, the company had already been in contact with the Utah Division of Real Estate regarding the issue.
"We did find out about mid-December that Modify Utah was going out of business," said Deanna Sabey, division director. "At that time, we advised Modify Utah to send a letter to its customers."
She said the company was told to provide copies of documents and files to any customer that requested them.
Sabey said in the wake of the housing crisis, many lending institutions have made the decision to forego modifying loans and have chosen to remove "bad loans" from their portfolios, resulting in greater numbers of foreclosures. She said people who find themselves in dire straits should contact their mortgage holder.
In the case of companies like Modify Utah, Sabey said customers who believe they have a case could also seek relief through the court system. The Division of Real Estate is in the process of investigating whether the company violated any state statute.
The closure still puts many in a difficult position, like one Utah man who paid Modify Utah several hundred dollars but whose loan modification was denied by the bank. He wouldn't give details to KSL, saying Modify Utah recently made him sign an agreement not to put the company in any bad light if he wanted a refund.
Utah's Division of Real Estate has already received some complaints about the company.
"They are in a really tough situation right now because they have paid out money to Modify Utah to get their loans modified and haven't been able to do that for one reason or the other," Sabey said. "We don't know if that's because Modify Utah hasn't provided services or if that's because the banks aren't willing to negotiate right now."
In an effort to protect future customers, she said the agency is proposing legislation that would preclude loan modification companies from charging up-front fees until there is a contract between the lending institution and the consumer.
"I think that will help (alleviate) a lot of the problem because (consumers) won't have to take any money out of their pocket until they receive a signed contract," she said.
At this point, she said there is no indication that Modify Utah was guilty of any wrongdoing, but customers who claimed to have paid thousands of dollars have filed complaints against the company.
In a letter to the agency, the company's lawyer said the firm was doing what it could to help its customers by returning files and loan modification materials, as well as arranging for a different firm to take over customers' files at discounted rates if they wanted to continue pursuing a loan modification. Other than that, there is little the company can offer, he wrote.
"Modify Utah and its owners do not have the ability or means to do anything else at this point," Guymon said. "This is an unfortunate and disappointing turn of events for all involved."
For people desperate to save their homes, Modify Utah's demise will make it even more difficult for them to avoid foreclosure.
The Division of Real Estate suggests Modify Utah's customers contact their mortgage company right away.
"If they don't have another loan modification company that they can go to, then they should see if they can do something directly with their lender in order to either postpone -- or perhaps a short sale or some other mechanism ... to help them out," Sabey said.
For more information on loan modification resources, visit www.realestate.utah.gov/consumers/loanmod.html.
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Story compiled with contributions from Jasen Lee and Sam Penrod.
