Loan Modification Scams

03.06.2009 Scam Alert

Introduction

In the midst of the mortgage crisis, Loan Modification companies have sprung up and spread like wildfire. And while many are certainly legitimate, scam artists have been on the rise, preying on distressed homeowners in hopes of making a quick buck. They will lure homeowners with tempting claims like:

• "Stop Foreclosure, guaranteed!"
• "91% Success Rate in Loan Modification"
• "We have special relationships with lenders…"
• "We can save your home! Guaranteed or your money back!"
• "Our team of attorneys can stop your Foreclosure this week!"

Red Flags

The Federal Trade Commission warns consumers of companies that:

• Guarantee to stop the foreclosure process – no matter what your circumstances
• Tell you not to contact your lender, lawyer, or credit or housing counselor
• Collect a fee before providing you with any services
• Accept payment only by cashier’s check or wire transfer
• Encourage you to lease your home so you can buy it back over time
• Tell you to make your mortgage payments directly to it, rather than your lender
• Tell you to transfer your property deed or title to it
• Offer to buy your house for cash at a fixed price that is not set by the housing market at the time of sale
• Offer to fill out paperwork for you
• Pressure you to sign paperwork you haven’t had a chance to read thoroughly or that you don’t understand.

What do you look for in a Loan Modification company

While there are certainly many scams, a legitimate Loan Modification company is invaluable to a distressed homeowner.

• Screened by the DRE – Any company under the California Department of Real Estate needs to be screened by the DRE and receive a "No Objection" letter before it can legally collect upfront fees. Some companies bypass this requirement by enlisting attorneys who are outside of the DRE’s jurisdiction. The DRE’s list of companies screened for advance fees can be found on:
  
  www.dre.ca.gov/mlb_adv_fees_list.html


• Local establishment – Many loan modification companies work nationally and are located in a different state. Make sure that you work with a company that you have physical access to. Nothing beats speaking to a consultant face to face. And unlike some vague online company (think scam potential), you can actually find and confront a local company should you encounter any problems.


• Mortgage expertise – Since a loan modification requires adjustment of the terms of you mortgage, the best loan modification specialists are those who have worked in mortgage financing in the past. This includes loan agents and loan processors. Who does not fit the bill? Anyone who may seem related to mortgage financing but has not actually handled loans.


• Additional foreclosure expertise – Sometimes even the best loan modification proposals will still be denied by the lender. If this happens to be your case, you need a company that will continue to take care of you. They should be able to offer Short Sale assistance, as well as credit restoration.