Some unscrupulous businesses make unrealistic promises about their success rates in obtaining loan modifications. These scammers guarantee they can obtain loan modifications regardless of the homeowners’ particular circumstances. In many cases, clients are advised to forego their monthly mortgage payments, ostensibly to improve their negotiating posture with the lender. In reality, these scammers are more interested in collecting large upfront fees. In some cases, these businesses trick unsuspecting homeowners into signing documents transferring ownership of their homes to the scammers.
These companies rarely, if ever, obtain a loan modification for their clients. Most charge their clients large upfront fees, but do little, if any, work once they have been paid. Often the homeowners ultimately lose their homes.
A variation to the loan modification scam is the mortgage servicing scam.
This involves the scam artist sending letters to homeowners telling them that their company has taken over servicing of the mortgage from the homeowner’s bank and that mortgage payments should now be made to the scam artists’ business. It is important that whenever homeowners receive a letter regarding a change in status or servicing of a mortgage they contact their bank to verify such changes.
In theory, loan modifications are good for both homeowners and lenders. Homeowners are able to remain in their homes with affordable monthly payments and lenders avoid disruption of their revenue streams as well as the expense and hassle of foreclosure. In practice, however, many homeowners attempting to negotiate loan modifications on their own find the process cumbersome, frustrating and too often ultimately unsuccessful.
Being a victim of a loan modification scam is avoidable. In general, there is no reason to hire a for-profit loan modification company. Homeowners can directly negotiate loan modifications with their mortgage loan servicers. For those who want assistance, however, the best option is to work with a HUD certified counselor. These counselors are knowledgeable about the various available loan modification programs and experienced in negotiating loan modifications. HUD certified counselors do not charge a fee for their services. To find a local HUD-approved housing counseling agency, call 702-229-HOME or 877-448-4692 or visit www.fightfraud.nv.gov
When using a for-profit company to negotiate a loan modification, do not pay fees until after the promised services have been provided. Recent regulations adopted by the Federal Trade Commission say loan modification companies are not permitted to charge upfront fees prior to performing the contracted services. Do not sign any document without first carefully reading and understanding its contents and do not agree to any arrangement whereby a legal interest in the home is transferred.
Consumers can report mortgage fraud to the Attorney General’s Bureau of Consumer Protection in Las Vegas at 702-486-3194. Consumer protection information can also be found online at www.ag.state.nv.us, www.fightfraud.gov and www.ftc.gov.