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Signs of a Loan Modification Scam

Loan modifications have helped thousands of people make their mortgages more affordable and avoid foreclosure. For that reason, many homeowners are desperate to get a modification approved, and have fallen victim to loan modification scams. If you are considering applying for a loan modification, make sure that you watch for these red flags which may indicate that you are not dealing with a reputable company.

#1: Up Front Requests for Payment

The Federal Trade Commission (FTC) is the country’s consumer protection agency. According to the FTC’s Mortgage Assistance Relief Services Rule, it is illegal for any company assisting with a loan modification to ask for payment before any services have been rendered.

Mortgage loan modification companies are only allowed to accept fees from the homeowner once the homeowner has actually received a loan modification offer. This means that even if you enlist the services of a loan modification company, you don’t pay until you get what you want.

There is one exception to this rule: Attorneys are allowed to accept retainer agreements for their services up front if they meet certain requirements and the money is placed in an attorney trust account. However, many unscrupulous loan modification companies will falsely claim to have an attorney on staff or will actually hire an attorney but fail to follow the rules. If you are unsure if a loan modification company is legitimate, always do your research before handing over any money.

#2: Requests That You Stop Paying Your Mortgage

A loan modification company may tell you that you should stop paying your mortgage in order to have a better chance at a loan modification. Alternatively, the company may request that you make your mortgage payments directly to them rather than to your mortgage lender.

Never stop making payments on your mortgage. If your mortgage lender refuses to accept payments, put this money into a separate account and save it for when your payments resume. Voluntarily ceasing payments to your mortgage lender will not improve your chances of receiving a modification, and may move your home closer to foreclosure.

#3: Payments for Free Programs

State and federal governments offer a wide array of programs that provide help for struggling homeowners. These programs, mainly run through the Department of Housing and Urban Development (HUD), are free to homeowners. The federal government provides counselors who will assist you in these types of loan modifications without charge. If a loan modification company claims to be able to get you a government-backed modification for a fee, contact your mortgage lender. Your lender can tell you if you qualify for any HUD-backed programs, and if so, what your options are. There is no need to pay a private company for services offered without charge by the state and federal governments.

#4: Pressure to Sign Paperwork

Shady loan modification companies may pressure you to sign documents that you do not understand. In some cases, a modification company may claim that your best option is to sign over the deed to your home to the company in order to keep it “safe.” This will not prevent a foreclosure and you will still be responsible for paying off the mortgage.

Alternatively, a loan modification company may tell you that there is no need to read the paperwork from your lender or the paperwork that they want you to sign. No legitimate company would pressure you to either sign or ignore documents that you do not fully understand.

Help For Homeowners

Pursuing a loan modification on your own can be intimidating. If you want assistance with a loan modification, the attorneys at the Loan Lawyers are here to help. We run an established law firm that understands the rules and regulations associated with loan modifications, and will help you get a loan modification the right way, without undue pressure or illegitimate business tactics.

To schedule a free, confidential case review and learn more about your loan modification options, contact Loan Lawyers today by calling (888) FIGHT-13 (344-4813).

  • ABC News
  • American Civil Liberties Union
  • CBS 4
  • CNN
  • Daily Business Review
  • Florida Trend's - Florida Legal Elite 2014
  • Florida Trend's - Florida Legal Elite 2014
  • National Association of Consumer Advocates
  • National Association of Consumer Bankruptcy Attorneys
  • NBC News
  • National Consumer Law Center
  • The New York Times
  • Avvo
  • Avvo
  • Avvo
  • Avvo
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