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