New York Attorney General Mario Cuomo painted the loan modification industry with a broad brush at a Tuesday morning press conference saying, “In many ways, the entire industry is a scam, in my opinion… No one has to pay for this service.” Cuomo’s remarks came as he was charging Amerimod with illegally charging upfront fees and for misleading advertising sent to homeowners facing imminent foreclosure.

Cuomo’s enthusiasm for do it yourself loan modifications flies in the face of recent evidence that the Obama Administration’s “Making Home Affordable” plan is off to a much slower start than anticipated. After initially saying that the program was responsible for somewhere between 10,000 and 55,000 loan modifications,  Jenni Engebretsen, Treasury spokesperson, declined to give a number stating “… that the Treasury was working with mortgage companies to fine tune reporting systems”. The horrible start has led to the conclusion by industry watchers that the program will have a negligible effect on foreclosures across the country, at best. As a point of reference, it has since been widely reported that through May there had already been one million foreclosure filings for the year in the U.S.

Another piece of evidence that runs counter to Cuomo’s stance is the fact that do it yourself loan modifications have been going back into default at a rate of 50%. Fitch Ratings recently published a report estimating that the re-default rate will climb to the 65% area by yearend. Attorney driven loan modifications, on the other hand, default at about half the rate of the do it yourself mod’s due to a variety of factors including better negotiating results, modifications based on the total financial picture of the borrowers, and the ability of professionals to prevent predatory terms from being entered in to the newly modified loans.

With over 600 executed loan modifications, many under circumstances that could qualify them as “miracle mod’s”, The Feldman Law Center and other firms like them would provide the third piece of evidence that Cuomo should re-think his position. Out of the 600 modifications, there are certainly hundreds of kids, moms, and dads that are still in their homes because a modification saved them from foreclosure.

Cuomo’s misguided statement is much like Barack Obama’s Johnny Cochranesque “If you must pay, then walk away“sound bite as “Making Home Affordable” was being rolled out. Cuomo’s ignorance of the problems facing homeowners that try to modify their own mortgage on their own is actually more egregious than Obama’s considering that Cuomo has the luxury of 20/20 hindsight. Stories of the rough and incompetent handling of borrowers dealing directly with their lenders seem to be a daily event across the country. The New York Times last week reported on an Arizona woman that applied for a loan modification directly with BankAmerica and was instead offered the “opportunity” to pay the bank $13,000 against her loan balance and $5,000 in fees to decrease her mortgage payment by $75 dollars a month. Now that, Mr. Cuomo, is a scam.