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July 15, 2015Struggling to pay the mortgage each month?
Considering seeking help negotiating a modification? Before you pay a company to negotiate that deal, think twice. It may be a scam.
Loan Modification Scam Alert, a campaign with the backing of the U.S. Congress aimed at educating homeowners how to protect themselves against scams, said a number of companies advertising their services are actually operating illegally.
If you are having trouble, you are not alone. Every 20 seconds in the U.S., another foreclosure is filed, according to LMSA program spokesman Douglas Robinson. And approximately 1 million households are currently in some stage of foreclosure.
Through the campaign’s website – loanscamalert.org – homeowners can find trusted help and report illegal activity.
Here are six red flags consumers should watch for before signing on the dotted line with any loan modification service.
• A company asks for advance payment to work with your lender to modify, refinance or reinstate your mortgage.
It is illegal for a company or person to charge fees in advance of those services, according to the Federal Trade Commission Mortgage Assistance Relief Service Rule. Lawyers are allowed to charge fees in advance, but they have to meet certain requirements and put the money in a client trust account.
• Your rep guarantees he can stop a foreclosure or have your loan modified.
Offering a “money-back guarantee” is a scam tip off. Loan modification is actually free to homeowners. You shouldn’t need a money-back guarantee. HUD-approved counseling agencies will promise only to do their best to help.
• You are advised to either stop paying your mortgage company or to pay the person promising services instead.
Run, don’t walk. Despite what a scammer says, homeowners should never stop paying their mortgage. Also, never send your payment to anyone other than your mortgage lender. If it has become difficult to pay your mortgage, contact your mortgage lender and ask for the loss mitigation department. A HUD-approved counseling agency can also help – and that service is free.
• You’re pressured to sign over the deed to your home or sign any unfamiliar paperwork.
Simply signing the deed to your home away does not free you of the debt. A legitimate housing counselor will not pressure you to sign any document you haven’t first read and understood.
• A company claims to offer “government-approved” or “official government” loan modifications.
Call your mortgage lender first. They can tell you whether you qualify for any government programs to prevent foreclosure. A HUD-approved agency can also help determine any programs you may be eligible for. Also, government-backed loan modification programs assist at no charge.
• You are asked to provide your financial information online or over the phone.
Only give this type of information to companies that you know and trust. Again, talk to your mortgage lender or a HUD-approved counseling agency.
