How to Avoid Loan Modification Scams

Avoiding Loan Modification Scams

Following the 2008 housing collapse, thousands of homeowners found themselves with mortgages they could no longer afford.

Many tried to stave off the inevitable foreclosure through loan modifications, only to find out their desperation had led to them to fall hook, line, and sinker into a scam.

While the housing market has since improved since those dreadful years following the collapse, there are homeowners who are still finding it difficult to pay their mortgages. Therefore, scammers still have a breeding ground to use their unsavory practices to take advantage of some of the most vulnerable people trying to keep their homes.

Here we’ll examine the loan modification scams that seem to be the most tempting, snagging homeowners time and time again.

We’ll also give tips that homeowners should use as their guide to avoid these scams in the first place.

What’s loan modification, anyway?

Before we go into the loan modification scams that plague homeowners, or the tips to avoid them, let’s first go over what exactly is loan modification.

Homeowners who fall behind on their mortgages have several options to avoid losing their homes, and one of those options is loan modification.

A loan modification plan permanently restructures a mortgage by changing its terms. Those terms include a reduction of the interest rate and/or monthly payment.

Loan modifications can also entail conversion of the interest rate to one that is more financially feasible for the homeowner. For example, the rate could be converted to fixed from variable.

The length of the term of the loan could be extended under some modification plans, also.

Homeowners should be clear on whether, or not, they qualify for loan modifications. Seeking the help of a counselor is the first step.

Eligibility requirements include showing proving financial hardship. Homeowners may have to provide their lender with documentation of that hardship.

For example, if the hardship is the result of a job loss, the homeowner may have to furnish the severance letter. Proof of income, recent tax returns and bank statements may also be required.

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They want a fee? Run.

Now that you understand what loan modifications are, let’s look at some of the most common scams run by these low-lifes.

Perhaps the most prevalent scam entails a so-called agency that promises to help the homeowner obtain a loan modification for an upfront fee. This, in itself, is ridiculous, because homeowners can receive such counseling for free by simply contacting the U.S. Department of Housing and Urban Development.

So, homeowners who encounter people who say they can help them, as long as they pay, should run for the hills. These people are notorious for taking your money and then running of,f themselves.

Red flags about these scammers include them insisting the homeowner not contact anyone about the agreement they are trying to reach with the homeowner. Also, these scammers can be so egregious as to ask the homeowner to pay whatever mortgage payment they can muster up directly to them instead of to the lender.

Ding, ding, ding, ding, ding. Homeowners in debt to their lender should pay the lender, not some stranger.

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Useless, fancy titles

Then there are so-called forensic loan auditors mortgage loan auditors, or foreclosure prevention auditors who say they are supported by forensic attorneys. That’s so professional-sounding, it’s no wonder they are often able to dupe even the most astute homeowner.

No matter, they are as crooked as they come. They may offer to review a homeowner’s mortgage loan documents to determine whether their lender complied with state and federal mortgage lending laws.

The Federal Trade Commission explains that these “auditors” may tell the homeowner that they can use the audit report to avoid foreclosure, accelerate the loan modification process, reduce loan principal, or even cancel the loan.

The best way to spot and avoid these fraudsters is to understand their false narrative so they can easily be spotted.

First, homeowners should know that there is no evidence that forensic loan audits will help them get a loan modification even if they’re conducted by a licensed, legitimate, and trained auditor, mortgage professional or lawyer, according to the FTC.

These so-called forensic auditors are known to tell homeowners that they can sue their lender based on errors in their loan documents. Then they’ll tell the homeowner that if they win, the lender is required to modify the loan to make the payments more affordable.

That is not true, warns the FTC. There is no such requirement.

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“Well, they kinda sound like a legitimate agency”

“Hi, I’m with the Federal Homeowners Assistance Bureau and I was told by your lender to contact you regarding your delinquent mortgage.”

Well, that sounds official, right? This is where Google could be a homeowner’s best friend.

Scammers are becoming very savvy in seeking out their victims and using official sounding names like the one used in the quote above. Some are even becoming bold enough to use federal emblems or logos on fake websites they build to reel in unsuspecting homeowners.

Homeowners can quickly learn the legitimacy of a company by doing a quick Internet search, and/or by contacting their lenders.

The Office of the Comptroller of Currency (OCC) points out that these scam artists may use such terms as “federal,” “TARP,” or other words or acronyms related to official U.S. government programs.

The agency goes on to note that “these tactics are designed to fool homeowners into thinking the scam artist is somehow approved by, or affiliated with, the government,” notes the OCC.

Homeowners can avoid the fraudsters who claim to be offering plans that are “government-approved” or “official government” by contacting their lenders. Again, lenders are readied to inform homeowners on whether, or not, they qualify for any government initiatives to prevent foreclosure.

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In Conclusion

Losing a home due to foreclosure can be one of the most devastating events to impact a homeowner. In desperation, homeowners may seek out or go for whatever offer they can to save their homes.

Unfortunately, scammers are waiting in the wings to swoop in with some offer that homeowners may be more than tempted to accept. The loan modification offer is one of the offers that scammers notoriously use to prey on unsuspecting homeowners.

Falling for one of these scam artists can make their financial situations even worse, potentially leading to the need for credit repair by a company like Lexington Law.

Legitimate loan modifications can happen for eligible homeowners, but they often come with wording like this:

  • “To get everything started, we just require a small, upfront fee.”
  • “Our loan modification program is approved by HUD.”
  • “Sign over your deed to our company and we’ll begin the process.”
  • “Don’t pay your lender directly anymore; just pay us and we’ll handle it for you.”
  • “We provide a 100% guarantee that you will get that loan modification.”

Homeowners facing foreclosure should keep in mind the old adage of “if it sounds too good to be true, it is.”

8 thoughts on “Avoiding Loan Modification Scams

  1. Is there any way to get back the money that I paid the lawyer who promised to stop the foreclosure and get me a loan modification?

    1. If the scammer is an attorney, contact the Bar Association for the state in which the attorney is licensed. You can file a complaint with the Bar Association about the attorney. To find out where the attorney is licensed, try the state where the attorney is located.

      First file a complaint about the attorney. The Bar Association will ask for copies of docs. The best ones to send are any written agreement you might have signed, a statement of what you were promised, When and how you paid, copies of cancelled checks or relevant pages from bank statements to show your loss, any other information that you think should be reported.

      Second, if the attorney is investigated and is disciplined, then submit a claim to the Bar Association’s “client protection fund”. It may be possible to recover money you lost.

      This process takes a long time. Expect 1 to 2 years. It’s worth doing. Your complaint helps other people avoid the scammer. It can add weight to other similar complaints.

  2. I was contacted by “Anthony Greene” of the Retention Advocacy Group (www.RetentionAG.org), offering to assist me obtain a mortgage modification @ Sep 12, 2016.

    He seemed quite professional and spoke proper English!

    Everything seemed above board until the final step when he sent me a contract to sign. It seemed a bit odd in that he said I shouldn’t contact my mortgage company, and they wanted @ $5,000 payment upfront!

    Surprisingly, I actually had sense enough to NOT continue!

    1. A client gave money to Friedman Law Associates in Hauppauge NY for a mortgage modification. She never got the modification and cannot get her money back. The money was required before any work was done which is not legal.

  3. I was scammed by my own Mortgage lender, Ditech Mortgage, Newport Law, from Irvine, CA. My husband passed away and I could no longer keep up with the payments. They set notices of default. Then Newport Law, aka Ditech Mortgage sent a notice to contact them to re-modify my mortgage payment for a fee of $5,000. They took “down payment” of $1,500 which I had to borrow. I was desperate. Ms. Liz Gomez would call me and keep me updated that she was working closely with Ditech Mortgage to lower my payments. This happened over the course of six weeks. She would call, but the very next day I would receive notices of auction dates. I researched and found out that Smith Newport Law was Ditech. They had no intention of helping me stay in my home. My home was posted on foreclosure websites with address, directions to my house and date of auction. I had complete strangers looking in my windows, walking up my driveway checking out my backyard. Not a safe feeling for a recent widow. I finally confronted them and notified the California Attorney General’s Office. Of course, I was told I would have to take them to small claims court to get the $1,500. Needless to say, I moved. Sad, I had lived there with my husband for close to twenty years. Never trust Ditech Mortgage. They are scammers. Never give money to anyone who says they will assist you with a HARP or HAMP remodification. It almost killed me. But, I got out and moved on with my life.

  4. My brother and I had to deal with TriWest USA who my current mortgage rep told me to pay which was Rushmore. After they took me for $3,126.00 Rushmore quickly return the loan back to SLS to handle the issue. TriWest USA contact myself and my brother every day until the got the money, even had a so called Lawyer by the name of David or Dave Sharpio who actually spoke with SLS Rep. Now they have me behind and I just had a heart attack and I will not stop until they are brought to justice for scamming people.

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