Foreclosure Rescue or Loan Modification?
A Manchester homeowner is three payments behind on a $248,000 first mortgage. "NH Relief Solutions" advertises "STOP FORECLOSURE - PRINCIPAL REDUCTION GUARANTEED." Its owner, Marcus, is also a New Hampshire-licensed MLO sponsored by a licensed broker. Marcus collects a $2,500 "retainer" before doing anything, tells the homeowner to stop paying the lender and not to call the servicer, and promises to get principal cut by 40%. The one-page contract has no cancellation right and no description of services. After six weeks, no lender contact has been made, and the homeowner receives a foreclosure notice. Marcus says the $2,500 is earned because he "reviewed the file."
1. Identify the licensing and prohibited-practice issues in Marcus's conduct.
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Marcus is mixing a loan modification/foreclosure-rescue business with an MLO license. New Hampshire regulates mortgage loan modification services and, together with the federal MARS Rule, restricts advance fees for negotiating loan modifications. Collecting $2,500 before any lender contact is the core problem: it shifts all risk to a distressed homeowner and creates an incentive to collect rather than perform. Advising the homeowner to stop paying and avoid the servicer is deceptive and harmful because it accelerates default and foreclosure. The contract lacks a cancellation right and a meaningful description of services, so the homeowner cannot make an informed decision. Promising a 40% principal reduction is an unsubstantiated guarantee. The fact that Marcus is licensed as an MLO does not authorize a separate modification company to evade these requirements.
2. What should the homeowner do now, and what remedies are available?
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The homeowner should stop relying on Marcus, contact the servicer or a HUD-approved housing counselor, and request loss-mitigation information immediately. The homeowner should gather the contract, receipts, advertisements, and any text messages, and demand a written accounting of the $2,500. Because foreclosure is pending, the homeowner should also ask about any New Hampshire foreclosure mediation or court process that may apply. Remedies may include a refund of unearned fees, restitution, civil claims under the Consumer Protection Act, and a complaint to the New Hampshire Banking Department. Marcus's conduct may also support discipline against his MLO license. The homeowner should not pay another advance fee and should document every communication.
3. Can the Banking Department discipline Marcus's MLO license even if the modification company is a separate entity?
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Yes, if Marcus used or held out his MLO license in connection with the conduct, or if his conduct shows untrustworthiness, dishonesty, or disregard of mortgage law. Licensing agencies look past corporate labels to the individual's actual role. Marcus's status as a sponsored MLO gives the Banking Department jurisdiction over his fitness and conduct, especially where he advertises mortgage-related services and interacts with distressed borrowers. Discipline could include suspension, revocation, fines, conditions, or a requirement to disgorge fees. The separate entity may also face enforcement if it is unlicensed or violates loan-modification rules. Marcus should not assume that putting the business in another company's name insulates his individual license.