Crackdowns on loan modification scams have been in the news almost as much as the foreclosures they are meant to prevent over the last few years. Are they really going on, and how can you prevent becoming a victim? Or is this all a distraction designed to profit those in power?
Do Loan Modification Scams Really Exist?
The current administration has lead a massive attack on loan modification companies, going far beyond any other witch hunts carried out in decades. Certainly if the government had made half this amount of effort to regulate the mortgage, real estate and securities industries earlier, we wouldn’t be in the economic and housing turmoil we are now.
This medieval-style crusade has resulted in unprecedented measures, including a widespread blackout of online advertising by suspected loan modification scams and companies. This, on top of massive regulation, which has virtually outlawed third party loan modification assistance as a business, and has some questioning whether it is really a matter of politics rather than combating a real threat to consumers.
There is no question that loan modification scams do exist out there somewhere even though you have probably met more people who have been victims of other types of mortgage banking and real estate fraud. So, while homeowners should absolutely seek out financial help in the form of loan modifications, it still pays to be vigilant to avoid becoming the victim of scam artists.
How to Dodge the Loan Modification Scam Bullet
While most foreclosure prevention advice focuses on telling homeowners to work directly with their lenders, the reality is this just doesn’t always work. Mortgage lenders and servicers are still playing hard ball a little too often and think they can scare homeowners into paying versus working with them. However, for those who don’t have the money, it really doesn’t matter what the threats are – if there isn’t any money to pay, they simply can’t.
The Hope Now government-backed alliance is one option which can put homeowners in touch with counselors, though having your own attorney battle for a loan modification for you can work too.
Of course there are no guarantees you won’t be taken advantage of by your lender again, but the biggest concern about loan modification scams comes from third party loan modification companies and foreclosure prevention companies who are taking people’s money or the deeds to their homes and not providing any help. This doesn’t mean that there aren’t any honest foreclosure relief or loan modification experts out there. It just means you need to be careful about who you deal with.
When to Run Away:
- You are asked to sign over the deed to your home.
- You are instructed to skip mortgage payments in order to qualify even if you can afford them.
- You are told to make mortgage payments to someone other than your lender.
- You are asked for large upfront fees without any guarantees of success.
- You are pressured into signing documents immediately.
- You are being cold called by hard-selling boiler room types.
What You Should Be Looking For
If you are considering enrolling the help of anyone except for your mortgage lender, it is essential that you take a few moments to do a little research on them. With a wealth of information at your fingertips on the Internet, there is really no excuse not to.
Forget testimonials and the Better Business Bureau, these are too easily tainted. Instead, check out consumer review sites like Yelp, look up licenses with state agencies, and ask for copies of real loan modifications that they have successfully negotiated for others.
How to Sound the Alarm
What if you are contacted by someone who you fear is in the business of loan modification scams, or worse – you believe you are already the victim of one?
There are a number of ways to sound the alarm bells to warn other homeowners and try to force the party in question to rectify the situation. Just make sure that you are above reproach yourself and that you give the opportunity for them to explain. You don’t want to ruin someone’s life because of a misunderstanding, and you don’t want the FBI’s spotlight on you if you did anything questionable when you applied for your original loan, whether you realized it was wrong or not.
If you do need to raise the alarm, consider:
- Filing a complaint with the Better Business Bureau.
- Reporting the issue to state licensing agencies.
- Reporting it to your state’s Attorney General’s Office.
- Making a complaint with the Federal Trade Commission.
- Contacting the Federal Bureau of Investigation.