House to House: Six Ways To Identify A Loan Modification Scam

In last week’s column I discussed a fairly new and dangerous threat has arisen for homeowners who have fallen behind on their mortgage payments and may be at risk of foreclosure – opportunistic companies. They often refer to themselves as a “foreclosure consultant”, “mortgage consultant,” and market themselves as a “foreclosure service”, “foreclosure rescue agency” or “loan modification company”. They count on homeowners being vulnerable and desperate.

These companies claim they can assist homeowners facing foreclosure with options that allow them to keep their property, refinance or modify an existing mortgage, repair credit or help “buy more time.” In reality, these “options” are intended to convince you to take the wrong steps so they can take your money and possibly your home. Remember the old saying, “If it’s too good to be true, it probably is.”

The Federal Trade Commission (FTC) has issued a new rule that bans the acceptance of an advance fee by mortgage relief/loan modification services until the homeowner has a written offer from their lender or servicer that they decide is acceptable. The Mortgage Assistance Relief Services (MARS) Rule is designed to protect homeowner from mortgage relief scams that have persisted during the current mortgage crisis.

According to the MARS Rule, mortgage relief companies must disclose that they are not associated with the government and that their services have not been approved by the government or a consumer’s lender; that the lender may not agree to change loan terms; and that consumers could lose their homes or damage their credit ratings if told to stop paying their mortgage. The MARS Rule also prohibits several common advertising tactics used by mortgage relief services and requires companies to have reliable evidence to support any claims about the benefits or effectiveness of the services they provide.

 “The good news for homeowners facing foreclosure is that legitimate avenues for relief exist,” McDaniel said.  “If a homeowner is having difficulty keeping up with mortgage payments, that homeowner should contact his or her lender to negotiate a modified payment plan. All lenders and servicers have a legal obligation to offer remediation services.”

 The National Association of REALTORS® and its partner NeighborWorks America, a national, nonprofit organization created by Congress to provide financial support, technical assistance and training for community-based revitalization efforts, have identified the following six red flags to indicate that you may be dealing with a loan modification scammer:

A company/person asks for a fee in advance to work with your lender to modify, refinance or reinstate your mortgage. They may pocket your money and do little or nothing to help you save your home from foreclosure.

A company/person guarantees they can stop a foreclosure or get your loan modified. Nobody can make this guarantee to stop foreclosure or modify your loan. Legitimate, trustworthy HUD-approved counseling agencies will only promise they will try their very best to help you.

A company/person advises you to stop paying your mortgage company and pay them instead. Despite what a scammer will tell you, you should never send a mortgage payment to anyone other than your mortgage lender. The minute you have trouble making your monthly payment, contact your mortgage lender.

A company pressures you to sign over the deed to your home or sign any paperwork that you haven’t had a chance to read, and you don’t fully understand. A legitimate housing counselor would never pressure you to sign a document before you had a chance to read and understand it.

A company claims to offer “government-approved” or “official government” loan modifications. They may be scam artists posing as legitimate organizations approved by, or affiliated with, the government. Contact your mortgage lender first. Your lender can tell you whether you qualify for any government programs to prevent foreclosure. And, remember, you do not have to pay to benefit from government-backed loan modification programs.

A company/person you don’t know asks you to release personal financial information online or over the phone. You should only give this type of information to companies that you know and trust, like your mortgage lender or a HUD-approved counseling agency.

If you or someone you know has been the victim of a loan modification scam, the Arkansas REALTORS® Association urges you to please take action by doing any or all of the following:

Call the Homeowner’s Hope Hotline at 1-888-995-HOPE (4673).
Call the Federal Trade Commission (FTC) at 877-FTC-HELP (1-877-382-4357)

Contact Arkansas Attorney General Dustin McDaniel’s Consumer Hotline at (501) 682-2341 or (800) 482-8982. Consumers may also visit McDaniel’s website, http://www.arkansasag.gov.

♦♦♦

House to House is distributed weekly by the Arkansas Realtors® Association.

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