Identifying Loan Modification Scams

How do i know whether or not i am dealing with a scam company in reference to loan modifications?

2 Answers

If you look online you’ll find hundreds of firms promising to work with your lender and get you the help you need. For a not-so-small upfront fee, of course. Is it worth it?

Look out for phonies. Mortgage modification is a new field and there are no licensing requirements, oversight boards, etc. Anyone can hang a shingle and claim to be a modification specialist. However, some professionals do have a code of conduct and board they answer to. Attorneys, CPAs, Certified Financial Planners, and nationally-regulated credit counseling or debt settlement firms have standards of ethics that at least in theory preclude them from making promises they can’t keep or ripping you off.

When You Have a Need for Speed Attorneys assert that their calls get answered and their letters replied to faster than those of consumers. If foreclosure is imminent and you need help fast, it may be worth it to engage a lawyer with a good reputation. Beware of over-promising practitioners. Other than contacting your lender, negotiating changes to the loan, and in some cases financial counseling,  a modifier cannot make any guarantees. For example promising a $100,000 principal reduction or a 3% lower rate is a red flag that should get you running.

Beware of High Upfront Fees Avoid any outfit that wants a huge fee before doing any work; these are non-refundable to you even if there is no progress in your modification. And that’s money you could be using to pay for necessities when you’re pinched for funds.

Try DIY or Non-profits First An online search turns up all kinds of examples of hardship letters and instruction for making your request to your lender. Before contracting with a for-profit company, contact your lender or the Homeowner’s Help Hotline (1-888-995-HOPE) run by the Homeowner’s Preservation Foundation. You might get a comprehensive, affordable mortgage modification that won’t cost a dime.

Words from a Very Outspoken and Opinionated California Litigation Attorney (like there’s any other kind)

Here in California, our Department of Real Estate website (www.dre.ca.gov) lists the companies that have DRE "permission" to modify loans... add to this list any licensed California attorney, and that is where you should begin your due diligence search when you seek help in California. Other states probably have similar laws, so check with your own state DRE and state bar.

My law firm has been getting more and more calls recently from homeowners that were victims of predatory lenders who put them into an unaffordable loan and now fell into the hands of those same people who sold the toxic loans but profess to be saviors... DON’T BE A VICTIM TWICE! What’s that they say, “Fool me once, shame on you, but fool me twice, and I’ll sue your butt!”

Do your homework and THOROUGHLY investigate any firm before hiring them to save your biggest asset and the place you call “home.” Scammers are popping up like dandelions on a freshly mowed lawn in April. They advertise on the Internet, freeway billboards, radio, television, and print media everywhere, not to mention spamming your email box with those third-world widows needing someone to receive three million dollars for them. Make no mistake, in many cases, these “loan modification experts” are the exact same loan officers and mortgage brokers who fleeced homeowners the first time around. After losing their jobs with the crash of the mortgage industry, they have found a new way to make ill-gotten profits from hard-working homeowners through loan modifications.

In California, with very few exceptions (and attorneys are one exception… no coincidence there… attorneys make the laws), it is against the law for anyone to take money up front for helping a homeowner who is in default. Don’t trust a company that begins its relationship with you by breaking the law.

HERE’S THE BOTTOM LINE! Hire an attorney – and not just any attorney either - one with experience in mortgage law, not just one with real estate law experience but one with experience in both FEDERAL and STATE litigation against mortgage companies, one who doesn’t also do family law, criminal law, admiralty law, and immigration law as well, one who limits the practice to mortgage law (or at least a great majority of it), one who has the experienced staff, training, and know how to take on the big lenders and their top notch lawyers (lenders have attorneys – and darn good ones – check out their counsel on the web – big names top schools, shouldn’t you have a lawyer too?).

We are not talking about a refund on your broken television here, we are talking about hundreds of thousands of dollars and your HOME – if you don’t think this is the time to hire a highly educated and experienced professional instead of a weekend schooled, almost out of work, broker slash loan officer slash “expensive water in a wine bottle with alleged magical curative powers” salesperson, I don’t know what would make you take things seriously.

Of course, this is one obnoxious lawyer's totally biased opinion, but one based on many many distressing calls to my office every day. And, yes, my firm loves taking cases against loan modification companies who have violated laws. This field is quickly becoming one of the fastest growing sections for our mortgage law firm.